Intel Corporation announced the termination of attempts to acquire the Israeli company Tower Semiconductor.
The value of the transaction, which has not been implemented, could amount to $5.4 billion. The corporation was unable to get approval from Chinese regulators in time.
On Wednesday, August 16, it became known that Intel and Tower agreed to terminate the agreement of February last year. Both sides of this interaction confirmed the termination of attempts to implement the transaction.
Against the background of the news that Tower Semiconductor will not be part of Intel’s ownership structure, the share price of this company decreased by 12%. For the corporation, the cancellation of the transaction turned out to be less sensitive. The value of Intel shares decreased by 0.1% amid the news of the termination of efforts to buy the Israeli firm.
At the same time, in the global context of development prospects for the American corporation, the cancellation of the transaction is a serious problem, since the expansion of the ownership structure by joining Tower Semiconductor was one of the main parts of Intel Executive Director Pat Gelsinger’s plan to increase presence in the fast-growing sector of the semiconductor industry, which is the foundry market, where Taiwan Semiconductor Manufacturing dominates. In terms of the scale of its activities, the Israeli company does not belong to the leaders in the field of manufacturing chips for customers on a contract basis, but it has the experience and consumer base that Intel needs.
Not having the best state of relations between China and the United States in the main dimensions of international cooperation negatively affects the approval process of transactions, significantly complicating it. Regulators in Beijing and Washington are currently making decisions, taking into account the factor of political conjuncture. This problem is exacerbated when it comes to transactions related to activities in the semiconductor industry. This sector of industry is very important in the context of technological development and is one of the main factors in ensuring technological sovereignty. Semiconductors are necessary for high-tech areas, including developments using artificial intelligence. The friction between China and the United States concerning the production of chips and the provision of this process, in a certain sense, is natural since strategic issues are being resolved in this case.
At the same time, against the background of geopolitical tensions, Beijing has not abandoned international economic cooperation as such. China sees it as a natural process of merging Chinese businesses with foreign companies operating in the country. At the same time, the process of approving joint projects is being delayed.
Last year, DuPont de Nemours rejected the proposed acquisition of Rogers for $5.2 billion. In this case, the transaction also did not take place due to the lack of approval from Chinese regulators. In 2018, Qualcomm rejected the offer of the manufacturer of NXP Semiconductors NV chips in the amount of $44 billion amid a protracted audit conducted by the State Administration for Market Regulation.
Sanford C. Bernstein analyst Stacy Rasgon says that the cancellation of the deal will not have critical consequences for Intel. He noted that the corporation’s activities in the foundry industry and in the case of the acquisition of Tower Semiconductor would be difficult, but in the current situation, the level of complexity is increasing.
Intel initially planned to implement the deal within 12 months, designating the first quarter of 2023 as the deadline, but the process turned out to be longer and ultimately fruitless. The corporation will pay Tower Semiconductor compensation for the termination of the contract, the amount of which will be $353 million.
The Israeli company produces chips for large customers such as Broadcom. Intel or Nvidia processors require more modern manufacturing facilities, but for markets such as electric vehicles, Tower Semiconductor plants are an acceptable option.
As we have reported earlier, Intel to enable commercially viable quantum computers.
