Intel Corp (INTC.O) will drop its $5.4 billion deal to acquire Israeli contract chipmaker Tower Semiconductor Ltd (TSEM.TA) once their contract expires later on Tuesday without regulatory approval from China, according to people familiar with the matter.
Intel, which signed the deal to buy Tower in February 2022, did not secure approval from Chinese regulators for the acquisition on time as required under the contract, the sources said, requesting anonymity ahead of an official announcement.
The development underscores how tensions between the United States and China over issues including trade, intellectual property and the future of Taiwan are spilling over into corporate dealmaking, especially when it comes to technology companies.
Intel does not plan to negotiate an extension of the contract, and will instead pay Tower a $353 million break-up fee to walk away, the sources added.
It was unclear whether regulators would have approved the deal had the companies extended their contract and waited for the review’s completion.
Intel and Tower declined to comment. Representatives for the State Administration for Market Regulation, China’s antitrust regulator, could not be immediately reached for comment.
Intel Chief Executive Pat Gelsinger had said he was trying to get the Tower deal approved by Chinese regulators and had visited the country as recently as last month to meet with government officials.