According to the individuals, who requested anonymity ahead of an official announcement, Intel did not obtain clearance from Chinese officials for the acquisition on time as needed by the contract.
The development demonstrates how tensions between the United States and China over topics such as trade, intellectual property, and Taiwan’s future are affecting corporate dealmaking, particularly in the technology sector.
According to the sources, Intel does not intend to discuss a contract renewal and will instead pay Tower a $353 million break-up fee to walk away.
If the firms had extended their contract and waited for the evaluation to be completed, it was uncertain whether authorities would have authorized the agreement.
Tower and Intel both declined to comment. Representatives from China’s antitrust authority, the State Administration for Market Regulation, could not be reached for comment immediately.
DuPont De Nemours and Company (DD.N) abandoned its $5.2 billion acquisition of Rogers Corp (ROG.N) last year due to difficulties in obtaining clearance from Chinese regulators.
Intel CEO Pat Gelsinger had stated that he was attempting to get the Tower purchase authorized by Chinese regulators and had visited the country only last month to discuss it with government officials.
Regardless of the Tower transaction, Gelsinger stated that Intel was investing in its foundry division, which manufactures chips for other firms.
In June, Israeli Prime Minister Benjamin Netanyahu announced that Intel will invest $25 billion in a new facility in Israel, the country’s largest-ever overseas investment.
As a result, investors had given up on the Tower transaction. Tower’s Nasdaq-listed shares closed at $33.78 per share on Tuesday, a significant discount from the $53 per share purchase price.
Intel’s foundry unit recorded sales of $232 million in the second quarter, up from $57 million the previous year, as it gained ground on rivals such as industry leader Taiwan Semiconductor Manufacturing Co (2330.TW).
The increase in foundry sales was due to “advanced packaging,” a procedure in which Intel may combine components of other companies’ chips to produce a more powerful processor.
After two years of robust growth spurred by remote work during the epidemic, demand for Intel’s chips has slowed, forcing the chipmaker to cut costs. It has pledged to reduce expenses by $3 billion this year, with a goal of saving between $8 billion and $10 billion by the end of 2025.