The decision is said to be due to Intel being unable to get timely regulatory approval from the Chinese authorities. Intel, which announced its decision to buy Tower last year, will now pay a termination fee of $353 million to the company.
"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.
The failure to obtain regulatory approval from the Chinese authorities has been blamed on the decision and is another example of how tensions between the United States and China is having an impact on technology companies.
Intel Chief Executive Pat Gelsinger had said he had been trying to obtain approval from Chinese regulators for the deal and had been having regular meetings with Chinese government officials.
Despite the failure of the deal, Gelsinger confirmed that Intel was still investing in its foundry business, which makes chips for other companies.
Intel's foundry business reported revenue of $232 million last year, up from $57 million a year earlier, with sales coming from "advanced packaging”.
Gelsinger said, “Our foundry efforts are critical to unlocking the full potential of IDM 2.0, and we continue to drive forward on all facets of our strategy.
“We are executing well on our roadmap to regain transistor performance and power performance leadership by 2025, building momentum with customers and the broader ecosystem and investing to deliver the geographically diverse and resilient manufacturing footprint the world needs.
“Our respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future.”
