Intel wanted to pay $5.4 billion to acquire Tower Semiconductor but failed to get Chinese approval, meaning the deal has now fallen through.

Intel wanted to buy Tower Semiconductor, but sees these plans thwarted by China. The Americans wanted to pay $5.4 billion for the Israeli chipmaker. Tower Semiconductor would provide good support for the new Intel Foundry division. This industry, created by CEO Pat Gelsinger immediately after his appointment, needs to open up Intel’s manufacturing capabilities to third parties. In other words, Intel wants to compete with TSMC and Samsung and hopes to acquire Tower Semiconductor to do so.

Engraving from China

The plans are over. The takeover required the approval of international regulators and the Chinese are opposed to it. More specifically, the Chinese regulator refused to make a decision within the allotted eighteen-month period. Without the Chinese blessing before the deadline, the deal fell through. Intel now has to pay Tower $353 million in severance pay.

Tower Semiconductor has factories in Israel, USA, Japan and Italy. The company is mainly focused on producing reliable, but less modern chips. Other international regulators didn’t see any competition concerns about the acquisition, and there’s little reason for China to think otherwise.

It is therefore best to put the fact that consent is not given in the political context. By not doing anything, China is sending a strong signal to the US and big US companies. The US wants to prevent China from using modern Western technology and imposes trade restrictions to this end, but the Chinese themselves have teeth too. By not making a decision in this case, China can inflict a subtle sting.