Intel Shows Why Global Chip M&A Is off the Table

livemint.com:

You can’t blame Intel for trying. You might be able to blame other tech giants for trying in the future. Intel has embarked on a risky and high-stakes journey to become a maker of chips designed by others.

This “foundry" business model is a sharp turn for the storied Silicon Valley pioneer that has long focused on just manufacturing its own designs. So it was little surprise that Intel turned to the outside for some help, in the form of a plan to acquire an Israeli chip foundry business called Tower Semiconductor for about $5.4 billion. That was 18 months ago.

The deal is off now, after failing to land the necessary regulatory approval from the Chinese government. Intel tactfully avoided pointing any fingers in its Wednesday morning announcement terminating the deal; Chinese customers account for 27% of its total revenue, and the company also has a deep supply chain in that country—as do most of its chip peers. Intel is also pressing on with its own foundry plans, having earlier this year named longtime insider Stuart Pann to run that side of the business.

Stacy Rasgon of Bernstein called that move just the latest sign that Intel wasn’t stacking all its chips on the Tower deal. “Overall we cannot believe that a deal break would be a shock," Rasgon wrote in a note Wednesday. In hindsight, it was kind of a shock that Intel even bothered trying.

The escalating chip war between the U.S. and China has seriously soured the prospects for major M&A deals that require the approval of regulators in both countries. Two previous semiconductor deals have been scuttled for lack of clearance by Chinese regulators—Qualcomm’s attempt to buy NXP in 2018, and Applied Materials’ proposed acquisition of Kokusai Electric in 2021.