Intel on Wednesday terminated its acquisition of Israeli chipmaker Tower Semiconductor, saying it failed to secure the required regulatory approval.
The tech giant said in a statement it is scrapping the planned deal "due to the inability to obtain in a timely manner the regulatory approvals required under the merger agreement."
Intel will pay a termination fee of $353 million to Tower.
Intel announced intentions to buy Tower — a contract chipmaker that manufactures semiconductors for other companies — in February 2022 for $5.4 billion.
Tower Semiconductor's Israel-listed shares were down 8% around 4:18 a.m. ET.
Reuters, citing people familiar with the matter, reported Tuesday that Intel did not secure approval for the deal from the Chinese authorities before a crucial deadline passed. Chinese authorities have not publicly communicated approving the purchase.
"After careful consideration and thorough discussions and having received no indications regarding certain required regulatory approval, both parties have agreed to terminate their merger agreement having passed the August 15, 2023 outside date," Tower Semiconductor said in a statement Wednesday.
The termination of the deal is a potential blow to Intel which, under CEO Pat Gelsinger, has pledged to boost its foundry business. Foundries refer to companies that manufacture semiconductors.
Over the years, Intel lost its lead in chipmaking to Taiwanese firm TSMC and South Korea's Samsung and is now trying to catch up. The deal would have given Intel a foothold in the specialty technologies on which Tower focuses, like radio frequency and industrial sensors.Â
Intel is seen as critical to the U.S. bid to regain leadership in semiconductor manufacturing.
The termination of the acquisition also highlights the way in which business deals continue to get caught between the U.S. and China's broader technology battle, with semiconductors at the center.
The U.S. has used export restrictions in a bid to cut China off from key semiconductor technology. China has restricted export of certain metals required in chipmaking and other technology. And Beijing also barred some entities in China from buying products from U.S. memory chip firm Micron.