China Blocks Intel’s $5.4bn Takeover Amid Rising Geopolitical Tensions
In a move that reflects the escalating geopolitical tensions between China and the West, the Chinese government has effectively thwarted Intel’s plans to acquire Israel’s Tower Semiconductor for $5.4 billion. Citing regulatory approval issues, Intel was forced to abandon the deal as a contractual deadline expired on August 15.
The failure to secure the necessary approvals from Chinese regulators highlights the strain in relations between the US and China. This comes on the heels of the US government’s ban on American investors supporting sensitive hi-tech companies in China, prompting retaliatory measures from Beijing.
Intel, one of the largest computer chipmakers in America, had hoped that the takeover of Tower Semiconductor would enable the company to penetrate the semiconductor foundry market and leverage the firm’s manufacturing expertise. However, with the deal falling through, Intel now faces a setback.
Bernstein analyst Stacy Rasgon believes that the deal’s collapse represents a modest disappointment for Intel’s foundry efforts. Rasgon suggests that the company’s expansion into the foundry market would have been challenging even with the acquisition, but it may prove even more formidable now.
When the deal was initially announced in February 2022, Intel anticipated a closing timeline of approximately 12 months. However, this target date slipped to the first quarter of 2023 by October and suffered yet another three-month delay in March.
Although trade relations between the US and China seemed to be improving earlier this year, mixed messages from American officials caused uncertainty. US Treasury Secretary Janet Yellen attempted to downplay tensions, stressing that the two countries did not view their relationship as one of great power conflict. However, President Biden referred to Chinese President Xi Jinping as a dictator and emphasized the economic difficulties China is facing during a fundraising dinner with US business leaders in June.
Intel now faces the prospect of paying a termination fee of $353 million to Tower Semiconductor following the collapsed deal. It remains to be seen how this setback will affect Intel’s future efforts in the foundry market.
The development highlights the significant challenges faced by companies operating in an increasingly tense geopolitical landscape. Uncertainties and growing rivalries between major powers impact business decisions and global trade dynamics. As the US and China navigate their complex relationship, businesses must adapt to the changing landscape and find alternative paths to pursue their strategic goals.
