Intel, Tower scrap $5.4B deal after failing to gain regulator approval
Intel (INTC) is ending its $5.4 billion deal to buy Tower Semiconductor (TSEM) after failing to get Chinese regulatory approval. As part of the deal's termination, Intel will pay Tower a $353 million fee. Yahoo Finance's Brad Smith and Diane King Hall break down the story.
Video Transcript
- Well, Intel is stepping away from its $5.4 billion deal to buy Tower Semiconductor. That after the company was unsuccessful in its efforts to gain Chinese regulatory approval. Intel will pay Tower a $353 million fee as part of the agreement to terminate the deal, often known as a breakup fee.
And, particularly here, some of the details of the termination that was announced in the wee hours of the morning. 3:00 AM Eastern time, in fact. They said-- at least-- Pat Gelsinger, CEO of Intel saying that, "our foundry efforts are critical to unlocking the full potential of IDM 2.0. They continue to drive forward all facets of that strategy. And they're building momentum with customers and the broader ecosystem and investing to deliver geographically diverse and resilient manufacturing footprint the world needs." And their respect for tower has only grown through this time period and process, but they're going to look for other opportunities to work together with them.
- We know this is a bit of a China story as well. The issues with securing approval for a deal like this. But interestingly enough, to me, even though Intel is getting dinged today, it's marginal when you compare it to how far the stock has run up this year.
Intel has certainly been a big beneficiary of the plays in Big Tech. So in the greater scheme of things, it looks like they'll be able to shake it off. And then investors kind of saw the potential for this as well, heading into this, this potential breakup. So it looks like-- I mean it's just-- it's a wash for Intel.
- Yeah. I mean, it sounds like they're still going to find some opportunities to potentially work together in the future. We'll see what that exactly means.
They said that they're building a customer value prop with the first open system foundry, technology portfolio, and manufacturing expertise, including packaging, chiplet standards, software, going beyond traditional wafer manufacturing. Which was one of the major issues for US based companies was that they were not able to do so much of the fabrication process and had to outsource so much of that.
And so now with the funding that's come from things such as the CHIPS Act on the kind of administration front or Washington front and then, additionally, how much investment is taking place to make sure that there is not that much reliance or not as much reliance as there had been coming into that surge of demand for these types of chips. That fabrication process that Intel is able to build out and ultimately fast track capacity production, that's going to be amazingly critical. And it'll be interesting to see exactly where some of those other partnerships start to come about to be able to bring that online in full.
