Intel's $5.4 Billion Acquisition of Israeli Chip Maker Falls Through Amid Escalating US-China Tensions

Intel and Tower Semiconductor's $5.4 billion merger transaction was unexpectedly canceled, heightening China-US tensions. Both Intel and Tower Semiconductor jointly announced the decision on Wednesday, blaming the breakup on a failure to get the regulatory clearances required by the merger agreement in a timely manner.

Due to the planned acquisition's significant financial and strategic ramifications, it had drawn interest worldwide. The approval of several regulatory authorities throughout the globe, including China's, was crucial to the acquisition.

However, even when Intel's CEO, Patrick Gelsinger, recently traveled to China in an effort to influence their decision, Chinese authorities remained steadfast in their refusal to approve the sale as Wednesday's deadline drew near, according to an AP News report.

What Went Wrong?

As US-China tensions escalate, especially in technology and the economy, this high-stakes agreement falls apart. The US tightens export regulations and hinders China's ability to buy and develop advanced semiconductor chips, raising geopolitical tensions.

The approval of mergers involving US companies has been delayed by China's State Administration for Market Regulation, as shown in the Intel-Tower Semiconductor deal, according to The Times of India. Intel intended to close the deal by the first quarter. The business extended the deadline when China denied it.

Tower Semiconductor's shares plunged more than 11% in pre-market trading on American exchanges after the merger failed, shaking global markets. The Tel Aviv Stock Exchange stock plummeted almost 10% instantaneously.

The chip manufacturer's CEO, Russell Ellwanger, emphasized the company's initial excitement about collaborating with Intel to further Pat Gelsinger's vision for Intel's foundry business. He expressed gratitude for everyone's cooperation in making the agreement happen.

Geopolitics' Impact on Tech Sector

This latest event highlights how political conflicts have permeated corporate deals, particularly those involving businesses with a technological emphasis.

Previously, owing to prolonged delays in obtaining clearance from Chinese authorities, DuPont De Nemours Inc. had to give up on its $5.2 billion purchase of electronics materials company Rogers Corp, per Reuters.

Pat Gelsinger, the CEO of Intel, who fought diligently to get Chinese permission for the Tower transaction, said that the company was making separate investments in its foundry business, which makes chips for other firms.

This story illustrates how geopolitics and business strategy overlap, especially when countries fight to control crucial technical industries. The most significant foreign investment in Israel to date, Intel's pledge to spend $25 billion in a new facility there, was announced by Israeli Prime Minister Benjamin Netanyahu in June.