China scuppers Intel’s $5.4B deal for Tower Semiconductor

Due to the delay in obtaining merger approval from Chinese regulators, Intel announced on the 16th that it would cancel its plan to acquire Israel’s Tower Semiconductor Ltd (High Tower Semiconductor) for US$5.4 billion, and would pay Tower Semiconductor a transaction termination fee of US$353 million. The outside world believes that this means that the technological cold war between China and the United States continues.

The conflict between China and the United States and the Cold War situation continue to rage, and high-tech mergers and acquisitions are repeatedly reported to be broken

The agreement, signed in February 2022, has yet to receive approval from the Chinese government by the August 15 deadline, despite Intel Chief Executive Gelsinger’s visit to China last month to meet with government officials in an attempt to win over regulators; Last June, Israeli Prime Minister Benjamin Netanyahu announced that Intel agreed to invest 25 billion US dollars to set up a foundry in Israel. The outside world thought that the chance of success of the merger was slim. After the breaking news came out, Gaota Semiconductor fell 10.69%, and this year’s decline in Nasdaq reached 30%, which is far from Intel’s 31.56% increase.

The purpose of the acquisition is that Intel wants to strengthen its Intel Foundry Services business, which provides foundry services for chips designed by other companies. This is not the first time a U.S. company has been derailed by Chinese government delays. DuPont’s proposed $5.2 billion acquisition of electronic materials maker Rogers Corp. last year also ended without approval from Chinese regulators. The market believes that the confrontation between the United States and China on trade, intellectual property rights and Taiwan’s future is gradually spilling over to corporate transactions, especially when it comes to high-tech industries.

Intel promotes IDM 2.0 and strives to become the second largest foundry in 2025

After experiencing two years of strong growth due to the demand for remote work during the epidemic, since the end of last year, due to the low visibility of the economy and the increase in terminal inventory, major companies have laid off employees. At the beginning of the year, Intel also announced that it will reduce this year by 3 billion The company will continue to cut costs and improve efficiency, with the goal of saving a total of US$8 billion to US$10 billion by the end of 2025.

In a statement issued on the 16th, Gelsinger mentioned again that the acquisition is to continue to promote IDM 2.0. After taking office in 2021, Gelsinger re-entered the wafer foundry through the establishment of the Intel Foundry Services (IFS) department, and hopes to faithfully present the operating status through an independent profit and loss statement and recognized foundry business revenue.

In addition to designing RAMP-C on Intel 18A, it has won heavyweight customers including Boeing, IBM, Microsoft, and Nvidia, and has also reached multiple agreements with ARM to allow chip designers to build low-power computing processors on Intel 18A. In the second quarter of this year, Intel’s wafer foundry revenue was US$232 million, a substantial increase from US$57 million in the same period last year. It is obvious that the results of the IDM 2.0 plan are gradually emerging, but it is still far away from becoming the second largest wafer foundry. There is quite a long way to go.

Draft Editor: Tang Haoru

“Business Benefits” advocates that “business is the greatest public good”, and its reports focus on enabling readers to understand the power of capital, the nature of business, and the language of finance and economics.