Intel backs out of $5.4 billion deal to buy Israeli firm Tower Semiconductor

Chip giant to pay $353 million to terminate acquisition after reportedly failing to receive okay from Chinese regulators as demanded by contract

Intel Corp.'s R&D center in Haifa. (Courtesy)
Intel Corp.'s R&D center in Haifa. (Courtesy)

Intel said Wednesday it was canceling a $5.4 billion deal to buy an Israeli company, Migdal HaEmek-based firm Tower Semiconductor.

The multinational failed to secure a go-ahead from Chinese regulators for the purchase as demanded by the contract, unnamed sources told Reuters.

Intel said in a statement it would pay $353 million to Tower Semiconductor in order to back out of the deal.

Pat Gelsinger, CEO of Intel, said his company’s “respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future.”

For nearly 30 years, Tower Semiconductor (formerly known as TowerJazz) has been manufacturing analog semiconductor chips for the consumer, industrial, automotive, mobile, infrastructure, medical, aerospace, and defense sectors. The firm has in the past worked to develop imaging technology for the US government that was used by NASA in 2018 to capture its first image within the Sun’s atmosphere.

Tower has factories in San Antonio, Texas; Newport Beach, California; and Japan and Israel. It also shares an Italian factory with another company.

Tower Semiconductor headquarters in Migdal Haemek, Israel, February 16, 2022. (AP/Ariel Schalit)

Announcing the purchase last February, Intel said the acquisition would significantly advance its integrated device manufacturing (IDM) 2.0 strategy, first announced in 2021, to fuel its manufacturing expansion, starting with an estimated $20 billion investment to build two new factories (fabs) in Arizona and another $20 billion for plants in Ohio and New Mexico. As part of the strategy, Intel launched Intel Foundry Services (IFS), a standalone business unit tasked with becoming a major provider of US- and European-based semiconductor manufacturing capacity to serve global customers.

It would have Intel’s sixth acquisition of an Israeli company over the past half a decade. Intel announced in 2021 the purchase of Screenovate, an Israeli developer of beaming and mirroring solutions for mobile devices, for an undisclosed amount.

In 2017, Intel bought Mobileye, a Jerusalem-based maker of self-driving technologies, for over $15 billion, a transaction that remains the biggest involving an Israeli company to date.

In July, Intel declined to confirm the “specific details” of a project lauded by Prime Minister Benjamin Netanyahu and the Finance Ministry.

Taking Intel by surprise, Netanyahu announced in June that Israel had inked an agreement “in principle” with the US semiconductor giant for an “unprecedented” investment of $25 billion to expand its chip manufacturing facilities in Kiryat Gat, south of Tel Aviv — the largest ever international investment for the country.

Intel employs 11,700 employees at its three R&D centers — in Haifa, Petah Tikva, and Jerusalem — as well as at its manufacturing plant in Kiryat Gat. The company says it is currently responsible for creating indirect employment positions for approximately 42,000 workers in Israel.

Intel Israel in 2022 posted record exports of $8.7 billion, constituting 1.75% of Israel’s entire GDP and 5.5% of all Israeli high-tech exports, according to the firm’s corporate responsibility report. Intel Israel purchased $3.5 billion in goods and services from Israeli businesses, up 60% from the $2.2 billion recorded in 2021.

Most Popular
read more: