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Following A Delay In The China Assessment, Intel To Cancel $5.4 Billion Tower Contract: Reports

Following A Delay In The China Assessment, Intel To Cancel $5.4 Billion Tower Contract: Reports
Without Chinese regulatory permission, Intel Corp. would abandon its $5.4 billion acquisition of Israeli contract chipmaker Tower Semiconductor Ltd. when their contract expires later on Tuesday.
The sources, who asked to remain anonymous ahead of a formal announcement, said Intel, which signed the agreement to buy Tower in February 2022, did not obtain approval from Chinese officials for the acquisition on time as required by the contract.
The change highlights how tensions between the United States and China over topics like trade, intellectual property, and the future of Taiwan are affecting business negotiations, particularly when it comes to technology businesses.
The sources further stated that Intel does not want to discuss a contract extension and will instead pay Tower a break-up fee of $353 million to terminate the agreement.
If the firms had extended their contract and waited for the assessment to be finished, it was uncertain whether authorities would have given the deal their blessing.
Tower and Intel chose not to comment. The State Administration for Market Regulation, China's antitrust watchdog, could not be reached for comment right away.
Due to delays in obtaining approval from Chinese regulators, DuPont De Nemours Inc. cancelled its $5.2 billion acquisition of electronics materials manufacturer Rogers Corp. last year.
Pat Gelsinger, the chief executive of Intel, had previously stated that he was working to get the Tower acquisition approved by Chinese regulators and had just recently travelled there to speak with government representatives.
However, Gelsinger also stated that despite the Tower sale, Intel was continuing to invest in its foundry division, which produces chips for other businesses.
The largest ever foreign investment in Israel, Intel agreed to invest $25 billion in a new factory there, according to Israeli Prime Minister Benjamin Netanyahu's announcement in June.
As a result, investors had given up on the Tower deal. Tuesday's closing price for Tower's Nasdaq-listed shares was $33.78; however, the sale price of $53 per share was significantly higher.
Intel's foundry division increased its sales in the second quarter from $57 million to $232 million, outpacing competitors like Taiwan Semiconductor Manufacturing Co., the market leader.
"Advanced packaging," a method by which Intel may mix components of chips created by different companies to create a more potent chip, is what caused the increase in foundry sales.
After two years of rapid growth spurred by remote labour during the epidemic, demand for Intel's chips has slowed, forcing the chipmaker to look for cost savings. With a goal of saving between $8 billion and $10 billion by the end of 2025, it has promised to cutting expenditures by $3 billion this year.

Christopher J. Mitchell

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