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Intel has called time on its plan to acquire contract chipmaker Tower Semiconductor, citing its inability “to obtain in a timely manner the regulatory approvals required under the merger agreement.”

Chip giant Intel first announced it was planning to buy the Israeli company for $5.4 billion way back in February last year, a move designed to bolster its own contract chip-making business with enhanced manufacturing capacity and intellectual property, while also giving it a wider global reach.

Indeed, Intel revealed plans to invest $20 billion in two new Arizona factories some two years ago, while also confirming a new offshoot called Intel Foundry Services (IFS) dedicated to manufacturing chips designed by other companies. It indicated a major expansion vertical for the company, but forging a relationship with companies already deeply integrated in the space would allow it to accelerate its burgeoning foundry plans. Tower Semiconductor had been manufacturing analog chips for hundreds of companies across the industrial spectrum for some two decades, making it an ideal acquisition target for Intel.

Although Intel hasn’t discussed any of the specifics around its regulatory obstacles — in China, or elsewhere — more than a year on from the original acquisition announcement, concerns started to mount earlier this year that the deal could be in peril due to pushback in China. Indeed, Intel CEO Pat Gelsinger made several personal visits to China to build relationships with industry and government, but it seems that this was insufficient to get the deal over the line.

While it may have been technically possible to conclude the acquisition without its approval, China represents a major part of Intel’s business and strategy, meaning getting the greenlight from regulators there was essential.

As a result of all this, Intel said it will have to pay a termination fee of $353 million to Tower Semiconductor, whose shares have dropped more than 11% in light of this news.