The Intel Corp logo is displayed outside its building. — AFP/File

After the firms’ contract expires later on Tuesday, Intel Corp will terminate its $5.4 billion acquisition agreement of Israeli contract chipmaker Tower Semiconductor Ltd, according to people with knowledge of the situation.

Intel failed to obtain Chinese regulator approval for its acquisition of Tower in February 2022, according to sources, as required under its contract with the Israeli firm. The company plans to pay Tower a $353 million break-up fee instead of negotiating an extension of its contract.

The change highlights how tensions between the US and China over topics like trade, intellectual property, and the future of Taiwan are affecting business negotiations, particularly when it comes to technology businesses, The Star reported.

Due to delays in obtaining approval from Chinese regulators, DuPont De Nemours Inc cancelled its $5.2 billion acquisition of electronics materials manufacturer Rogers Corp last year.

Meanwhile, Intel CEO Pat Gelsinger said that he is attempting to get the Tower deal approved by Chinese regulators and has visited the country to meet with officials. However, Gelsinger also plans to invest in Intel’s foundry business, which produces chips for other companies, regardless of the Tower deal.

As the largest-ever foreign investment in Israel, Intel agreed to invest $25 billion in a new factory there, according to Israeli Prime Minister Benjamin Netanyahu’s announcement in June.

As a result, investors had given up on the Tower deal.

Tuesday’s closing price for Tower’s Nasdaq-listed shares, which was previously $53 per share, dropped to $33.78.

Intel’s foundry division increased its sales in the second quarter from $57 million to $232 million, outpacing competitors like Taiwan Semiconductor Manufacturing Co, the market leader.

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