After regulators did not approve the deal, Intel scrapped its acquisition of Tower Semiconductor for $5.4 billion.

The acquisition of Israeli chipmaker Tower Semiconductor by Intel was terminated on Wednesday due to regulatory approval issues.

A termination fee of $353 million will be paid to Tower by the U.S. chip giant.

Tower will be acquired by Intel for $5.4 billion in February 2022. In addition to manufacturing semiconductors for other companies, Tower also manufactures contract chips.

As a result of failing to secure regulatory approval, Intel terminated its acquisition of Israeli chipmaker Tower Semiconductor on Wednesday.

It said it is scrapping the deal “due to the inability to obtain the regulatory approvals required under the merger agreement.”

Tower will receive a termination fee of $353 million from Intel.

For $5.4 billion, Intel announced plans to buy Tower, a contract chipmaker that manufactures semiconductors for other companies.

The Israeli-listed shares of Tower Semiconductor were down 8% around 4:18 a.m. Eastern Time.

Reuters reported Tuesday that Intel failed to secure approval from the Chinese authorities before a critical deadline. There has been no public communication from the Chinese government approving the purchase.

As a result of careful consideration and thorough discussion, and after receiving no indications regarding certain regulatory approvals, Tower Semiconductor and its partner have agreed to terminate the merger agreement, which expired on August 15, 2023.

As part of the U.S.’s effort to regain semiconductor manufacturing leadership, Intel is seen as crucial.

Additionally, the termination of the acquisition underscores how business deals remain entangled in the broader technology battle between the United States and China.