Beijing's silent treatment topples Tower Semiconductor merger with Intel
- Reference: 1692188076
- News link: https://www.theregister.co.uk/2023/08/16/intel_tower_deal_crumbles/
- Source link:
The incident is being seen as payback from Beijing for US semiconductor sanctions against China.
The two companies [1]announced 19 months ago that they'd entered into a definitive agreement for Intel to acquire Tower Semiconductor, which specializes in manufacturing high-value analog semiconductor components for customers worldwide.
[2]
However, as with many mergers, approval was required from the regulatory bodies in various territories, and it is understood the proposed sale was given the go-ahead everywhere except for China.
[3]
[4]
The transaction was originally expected to close within 12 months, but the pair extended the deadline while awaiting approval from China's State Administration for Market Regulation (SAMR), first until June and then again to August 15.
$353M later...
Now it appears that rather than extend the deadline further, Intel and Tower Semiconductor have mutually agreed to call the whole deal off. This will not come without cost – in accordance with the terms of the merger agreement, Intel is required to pay Tower a termination fee of $353 million, which totally wipes out the $232 million revenue Intel Foundry Services (IFS) reported for [5]for Q2 2023 . The division only officially opened for business in 2021.
In a [6]statement , Tower Semiconductor said the decision followed careful consideration and discussions after the companies had received "no indications regarding certain required regulatory approval," and as a consequence, both agreed to terminate their merger agreement once the August 15 date was reached.
At the time of its first announcement, the purchase was billed as a "highly complementary transaction" that would play a key role in Intel's plans to become a major provider of foundry services and semiconductor manufacturing capacity globally.
[7]
Stuart Pann, Intel senior vice president and general manager for IFS, claimed today the company had nevertheless made significant advancements toward becoming the second largest global external foundry by 2030.
"We are building a differentiated customer value proposition as the world's first open system foundry, with the technology portfolio and manufacturing expertise that includes packaging, chiplet standards and software, going beyond traditional wafer manufacturing," Pann said.
But Omdia Principal Analyst Manoj Sukumaran told us he believed the deal falling through would be a blow to Intel's transition to become a foundry services provider.
[8]Gelsinger: Intel should get more CHIPS Act funding than rivals
[9]Get 'em while you can: Intel begins purging NUCs from inventory
[10]Say hello to Downfall, another data-leaking security hole in several years of Intel chips
[11]Apple, Samsung, and Intel to invest in Arm IPO, and emerge with some control: report
"Tower is an established foundry service provider with many key customers, IPs, EDA partnerships and expertise in specialty technologies for RF, Power and industrial sensors. Intel will be losing out not just their capacity, customers, and technology, but also their process and expertise in offering services to fabless companies which I believe would have been very important for the success of IFS," he said.
The two companies did not explicitly state it, but the apparent lack of engagement from the Beijing authorities on approving or rejecting the merger is likely caused by the current sour relations between the US and China over semiconductor technology.
[12]
It isn't all bad news for IFS. Intel announced a partnership with Synopsys this week that will see designs such as interface technologies available for inclusion in chip designs by Intel foundry customers.
The move followed a similar [13]deal with Arm a few months ago that makes it easier for Arm licensees to have their system-on-chip (SoC) products manufactured at an Intel fab using the upcoming Intel 18A process node. ®
Get our [14]Tech Resources
[1] https://www.theregister.com/2022/02/15/intel_buys_tower_semiconductor/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZNzyqhiFlqWPaxGQEJwVqgAAAw0&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZNzyqhiFlqWPaxGQEJwVqgAAAw0&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZNzyqhiFlqWPaxGQEJwVqgAAAw0&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.theregister.com/2023/07/28/intel_q2_results/
[6] https://ir.towersemi.com/news-releases/news-release-details/tower-announces-termination-intel-acquisition-agreement
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZNzyqhiFlqWPaxGQEJwVqgAAAw0&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.theregister.com/2023/08/15/gelsinger_intel_subsidies/
[9] https://www.theregister.com/2023/08/14/intel_nuc_purge/
[10] https://www.theregister.com/2023/08/09/google_intel_downfall/
[11] https://www.theregister.com/2023/08/09/softbank_q1_2023_arm_ipo/
[12] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZNzyqhiFlqWPaxGQEJwVqgAAAw0&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[13] https://www.theregister.com/2023/04/12/arm_and_intel_fab_deal/
[14] https://whitepapers.theregister.com/
Re: Quick question
Because Intel were so foolishly confident and impetuous that they signed a contract with massive break penalties even if the deal didn't go ahead for reasons outside Intel's control. The £353m isn't the only cost because all Intel's advisors and bankers will still be seeking most of their fees. If that's only 1% of the deal costs that's another $54m, but given the advanced stage the deal got to, I'd hazard a guess Intel will be on the hook for double that, pushing the costs of this misguided corporate adventuring towards half a billion quid (and that's before any shareholder litigation).
You'd have to be a complete idiot to sign a deal like that. Or just somebody who doesn't give a tinker's cuss about burning well over a third of a billion dollars of shareholder's cash.
Re: Quick question
This is normal in mergers, the 'buying' side agrees to cover the administrative costs and loses that the 'selling' side incurrs as a result of the merger process.
Re: Quick question
It's only normal when you're dealing with a buying company run by idiots, although I'll grant you that's sadly common, especially with cash rich globo-corporations spending other people's money. I've been involved in M&A where there's been no break fee. Seems to occur when the seller's advisors spot that the buyer is a slavering idiot, blind to everything except the idea of making an acquisition.
Both buyer and seller hope to gain something through a transaction. What genuine logic is there for one side to cover the other's costs in any event? Any director would have to be a total Jeremy Hunt to sign on for huge liabilities in respect of events outside their control. What would have happened if Intel had said no to break clauses? Tower would have had to either accepted their share of the risk or walked away, and if the latter who else was going to be popping up with five billion in cash, and a belief in "strategic fit"?
Again, why a merger ?
Couldn't they have just signed commercial agreements with binding partnership clauses ?
Everything has to be a merger these days, nobody knows how to play nice any more.
Quick question
Why does Intel need to cough up cash when somebody else somewhere else effectively blocked the merger from happening?