Intel CEO: 'Disappointed' Tower deal had to be scrapped

Intel (INTC) scrapped its acquisition of Tower Semiconductor (TSEM) after Chinese regulators failed to approve the deal in a timely manner. In an interview with Yahoo Finance's Akiko Fujita, Intel CEO Pat Gelsinger says the company was "disappointed" the deal couldn't happen. Gelsinger says the deal would have "accelerated" his ambitions for the company to be a foundry, but now he will "have to find other ways to drive the agenda because it's not likely that any major technology acquisition will get regulatory approval." It's something Gelsinger says is "disappointing because M&A has always been a factor in how technology companies have been building and moving their strategies forward."

Video Transcript

AKIKO FUJITA: It feels, though, that increasingly, that the policy coming out of Washington is really sort of coming into this intersection with the business of semiconductors. And we got this headline this week. You call off this deal with Tower Semiconductor, roughly $5 billion, because you couldn't get the approval from regulators. What does this mean for your ambition in building out the foundry business when you can't get the approval from China? I mean, this has clearly got to sort of hamper your ambitions. You

PAT GELSINGER: Know, unfortunately, you know, we weren't able to get approval for the Tower acquisition. And because I would say it was simply caught in this, you know, center of US-China or the geopolitics going on. We're disappointed by that because being able to acquire a foundry company like Tower would have accelerated. My, you know, ambitions to be a foundry weren't dependent on the deal, but they would have been accelerated by it.

So simply put, I have to find other ways to drive the agenda, because it's not likely that any major technology acquisition, you know, will get regulatory approval. And I think that's disappointing because M&A has always been a factor in how technology companies have been, you know, building and moving their strategies forward. And it's unfortunate, you know, that that's become a consequence of the current geopolitical tensions.

And for us, it will slow me down in some aspects. But, you know, my strategy is not dependent on getting this particular deal done. It would only be helped and accelerated by that. And we're going to find other ways to keep moving our strategy forward in light of that.

AKIKO FUJITA: If M&A isn't in play because of the regulatory environment, what are the other ways?

PAT GELSINGER: You know, business partnerships, winning customers, building capabilities organically. You know, but I do think that this consequence of the M&A no longer being available for companies. And this isn't an Intel statement, this is an industry statement. You know, I think is an unfortunate consequence of the current geopolitical situation.

And, you know, part of the reason that we've advised, I'll say, balance and temperance on both sides. We need the, you know, US and Chinese collaborating, discussing with each other. You know, these are the two largest economies in the world. You know, I've been to China twice. I'm the chair of the US Chamber's China center. Because we believe there needs to be this bridge between these two important economies of the world.

And you know, I've personally stepped into that role to help to play some of that bridging role. Obviously visits by the various cabinet members, Yellen and Blinken recently, Kerry and I think Raimondo later this month, all of these, I believe, are very positive steps. Let's at least have the real conversations going on.

AKIKO FUJITA: You alluded to the fact that, you know, this is an industry that is global. And as we have seen, the geopolitical side of this play out, we've learned that. You know, whether it is in Europe, whether it is in Asia, whether it's in the US, if there are walls being-- barriers that are being drawn up, does that ultimately hurt innovation in this space?

You look at the US. The US has excelled in the design of chips. Manufacturing may be in Asia, but the US provides the machines that allow for that. We've seen that in Europe, too. What happens when those barriers start to go up because of geopolitics?

PAT GELSINGER: You know, I do think that it has a negative implication on the innovative cycle for the world in that regard. And I think like in areas of AI, you know, we've seen that the US has led, right, profoundly. So all the major AI innovations. Despite some declaring that wouldn't be the case even just a few years ago, right. That China was going to win in that race. Well, it hasn't worked out to be the case.

I believe fundamentally because of the open, innovative, somewhat chaotic cycle that we have and the very aggressive venture and entrepreneurial aspects that we bring to the table. And I think that's best served by largely open global markets. You know, and I believe that history has demonstrated that time and time again that that's the best way to, you know, approach global policy for markets.

Semiconductors are one of the largest export items for the American economy now. One of our largest exports to China. Only number two to soybeans. You know, this is big. This is important. And if we're going to be a global manufacturer at scale, we need access to global markets. We need to continue to invest in our long-term research.

Another aspect of the CHIPS Act was those long-term research investments as well. You know, so let's be ahead today. Let's plant the seed corn to be ahead tomorrow, and let's underpin it with manufacturing at scale.