The tech world witnessed a significant setback when Intel, a renowned international tech giant, had to abandon its bid to acquire Israeli chip producer, Tower Semiconductor. This change in course occurred after Intel hit a roadblock with regulatory approvals in China, leaving what would have been one of Israel's most substantial high-tech deals uncompleted.
Initially, Intel's deal with Tower Semiconductor was set at an impressive $5.4 billion. However, regulatory clearance from China was pivotal for the transaction to move forward. Unfortunately for Intel, obtaining this approval proved impossible. Insiders revealed that the tech magnate has decided not to challenge this decision. Instead, Intel is leaning towards compensating Tower with a hefty cancellation fee, roughly around $350 million. This would have marked Intel's largest buyout since its acquisition of Mobileye in 2017, for which the company had shelled out $15 billion.
$INTC and $TSEM mutually agree to terminate the acquisition.
— Couch Investor (@Couch_Investor) August 16, 2023
Intel will pay Tower Semi $353M in termination fees.
This happened because China did not approve of the deal before the deadline expired.
Bad for Foundry? Meh pic.twitter.com/RsJh3J1hls
Back in February 2022, Intel's agreement to purchase Tower was inked with significant expectations. The move was envisioned as a strategic pivot for Intel, signaling its ambition to delve into the contract chip manufacturing realm. Instead of exclusively producing chips based on its proprietary designs, Intel aimed to cater to designs and orders from other companies as well.
Further emphasizing this strategy shift, Intel initiated the Intel Foundry Services (IFS) in March 2021. The primary objective behind IFS was to cater to the escalating global demand for semiconductor manufacturing. Intel had aspirations to solidify its position as a leading chip manufacturer in the US and Europe and extend its services on a global scale.
#china https://t.co/fWhYUOdrhG
— Charles R. Smith🔹 (@softwarnet) August 16, 2023
Intel Scraps Tower Acquisition After China Fails to Approve Deal
It had agreed in February 2022 to pay more than $5 billion for the Israeli chip maker
Pat Gelsinger, Intel's CEO, voiced his thoughts on the recent developments, stating, "Despite the recent challenges, our commitment remains unwavering. We're dedicated to our roadmap and will intensify our efforts to cater to the multifaceted chip production needs globally. Our admiration for Tower has only amplified through this journey, and we're optimistic about potential collaborations in the future."
Responding to the situation, representatives from Tower Semiconductor commented, "Upon meticulous analysis and comprehensive dialogues, and in the absence of any affirmative indications regarding necessary regulatory approvals, both parties have concurred that the acquisition cannot materialize."
$TSEM $INTC - Intel Drops $5.4 Billion Deal for Tower Semiconductor Amid China Holdup. It’s a Blow to Chip Strategy. https://t.co/FDrdQAGTwt
— Hammerstone Markets (@HammerstoneMar3) August 16, 2023
Now, with the deal off the table, questions arise about Intel's future investments in Israel. Previous reports from June suggested Intel's plans to invest a staggering $25 billion to inaugurate a new manufacturing facility in Kiryat Gat. Accompanying this investment, Intel was also rumored to hire several thousand employees in Kiryat Gat, offering them salaries surpassing the industry average. How these plans will be affected in light of the recent turn of events remains to be seen.
