China derails $5.4bn Intel takeover as tensions rise with the West

Intel CEO Pat Gelsinger hoped the Tower deal would help the company enter the semiconductor foundry market. Credit: Ariel Shalit/AP

China foiled Intel's $5.4bn (£4.2bn) takeover plan as geopolitical tensions escalate with the West.

Intel, one of the largest US computer chip makers, was forced to back out of a planned buyout of Israel's Tower Semiconductor on Wednesday.

The US company said it canceled the deal because it failed to obtain «necessary regulatory approvals» from China.

The contract expired at midnight on August 15.

Chinese watchdogs failed to reach a decision in time to close the deal, reflecting rising tensions between the Asian superpower and the US.

U.S. officials recently banned U.S. investors backing sensitive high-tech companies in China, prompting more retaliation from Beijing.

Intel CEO Pat Gelsinger hoped the Tower deal would help it enter the market foundry production of semiconductors, having acquired the production experience of the company.

Instead, Intel will now have to pay a $353 million termination fee to Tower, which was confirmed on Wednesday.

1904 Western Chip Manufacturing Falls

Bernstein analyst Stacey Rusgon said the deal's failure would be a setback for Intel.< /p>

“The failed deal is indeed somewhat disappointing for the Intel foundry outlook,” he wrote in a research note.

“Overall, Intel foundry has never been easy, even with the Tower , but now it can be even more difficult without it.”

When the deal was first announced in February 2022, Intel said it would take «about 12 months» to close.

By October, that target date had been pushed back to the first quarter of 2023, and by March, it was warning of new three-month delay.

U.S.-China trade relations have shown signs of improvement this year, despite conflicting messages from U.S. officials.

U.S. Treasury Secretary Janet Yellen downplayed speculation that the two countries are growing at odds since her visit to Beijing in July.

“President Biden and I do not view the US-China relationship as a great power. conflict,” she said. «We believe the world is big enough for both of our countries to prosper.» However, President Biden called Xi Jinping a «dictator» during a fundraising dinner with U.S. business leaders in June, adding, «Worry about China, but don't worry about China… I'm serious. China is in real economic trouble.”