Intel, the US-based semiconductor giant, has terminated a deal with China’s Tower Semiconductor amid escalating tensions between the United States and China. Intel will pay Tower a break-up fee of $353 million to walk away from the deal, according to sources familiar with the matter.
The decision highlights how geopolitical issues, such as trade disputes, intellectual property concerns, and the future of Taiwan, are now impacting corporate agreements, particularly in the technology sector.
Intel’s CEO, Pat Gelsinger, had been seeking approval from Chinese regulators for the Tower deal and had even visited China last month to hold meetings with government officials. However, Gelsinger emphasized that regardless of the outcome, Intel was committed to investing in its foundry business, which manufactures chips for other companies.
Investors had grown skeptical about the prospects of the Tower deal, causing Tower’s shares to trade at a significant discount compared to the deal price. Tower’s Nasdaq-listed shares closed at $33.78 on Tuesday, far below the agreed $53 per share price.
This is not the first time that a corporate deal between US and Chinese companies has faced obstacles due to regulatory hurdles. Last year, DuPont De Nemours’ acquisition of electronics materials maker Rogers Corp was abandoned due to delays in securing approval from Chinese regulators.
Meanwhile, Intel’s foundry business has been witnessing growth, reporting a revenue of $232 million in the second quarter, a significant increase from $57 million in the same period last year. This growth has allowed Intel to compete with leading industry player Taiwan Semiconductor Manufacturing Co.
It is evident that the broader geopolitical landscape is influencing corporate decision-making and dealmaking in the technology sector. As tensions between the United States and China continue to intensify, it remains to be seen how future agreements will be affected and whether companies will face increasing challenges in navigating complex regulatory environments.
Neither Intel nor Tower commented on the termination of the deal, while the State Administration for Market Regulation in China, the country’s antitrust regulator, could not be reached for immediate comment.
In conclusion, Intel’s termination of its deal with Tower Semiconductor and the subsequent payment of a break-up fee underscores the impact of US-China tensions on corporate agreements. With geopolitical issues now permeating the technology sector, companies face increased challenges in pursuing cross-border deals. The termination also serves as a reminder of the delicate balance multinational corporations must strike when navigating complex regulatory environments.
