NEW YORK, Aug 16 (Reuters) - Intel Corp (INTC.O) scrapped its $5.4 billion deal to buy Israeli contract chipmaker Tower Semiconductor Ltd (TSEM.TA) after their merger agreement expired without regulatory approval from China.

Question is whether China can block any merger deal between a U.S. company and another company even if they don't ship goods or sell services to China like Google and Facebook, and whether the U.S. government can do anything to allow a merger to take place even if the companies don't receive regulatory approval to do so. It is especially interesting since the U.S. and China are in an all-out tech and economic war.

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    Intel doesn't need to ship products to China in order for it's products to be used there
    – Joe W
    Aug 23 at 1:05
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    It seems there is a misunderstanding in your question. It appears that Intel does lots of things in China which is likely why their approval matters. "Intel, which has long had operations in China, said Wednesday that it had “mutually agreed” to terminate a planned merger with Tower Semiconductor, an Israeli chip manufacturer" nytimes.com/2023/08/16/business/…
    – Joe W
    Aug 23 at 1:11
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    Yeah the US could decouple from China in the the "can do anything" department. That that is not happening may suggest your "all out economic war" isn't quite so.
    – Fizz
    Aug 23 at 16:14
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    @JoeW Clearly Intel doesn’t agree that they don’t need to do business in China.
    – user47010
    Aug 23 at 17:24
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    Why should the US want to? It seems like China is helping us enforce our own self-interests where our own laws are toothless or the people who are supposed to be enforcing them, aren't. Aug 24 at 4:11

5 Answers 5


International relations theory says that states are sovereign and that trade is a privilege, not a right. That derives from the concept of Westphalian Sovereignty. The states' sovereignty is somewhat tempered by treaties like the WTO, where countries agreed on general trade rules. But there are many exceptions to those. Based on national security or other laws, a state can block a foreign company from trading.

So Intel could buy Tower Semiconductor, and get banned from China, or they do not buy Tower, and remain allowed to trade in China.

Some states or groups of states are large enough that the threat of being banned from that market gives most companies pause. Certainly the US, but also China and the EU. Other countries are so small that the threat falls flat.

  • Similar issues are raised by the Microsoft-Activision takeover which has been blocked in the UK but not in other markets (EU, US, etc). I doubt Microsoft would be willing to surrender all business in the UK, but might be willing to surrender some in the interests of greater profits elsewhere.
    – Stuart F
    Aug 23 at 8:11
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    OP seems to have a slight misconception on what states blocking a merger actually do. China did not forbid Intel from buying Tower Semiconductor they have no legal power to do that. What they did do is tell Intel that if they were to perform the merger, then China would forbid them to operate in China, which is clearly within Chinas power to decide. And then Intel decided it is overall better for them to cancel the merger.
    – quarague
    Aug 23 at 9:40

Nothing ! Works as designed.

China is allowed to disapprove any merger. Intel is allowed to ignore China’s disapproval. Intel won’t do that cause China’s a huge market and Intel is trying to do business in that market. Intel would be foolish to ignore China. I don’t see the problem? That’s just business.

We aren’t in an economic nor technological war with China nor any other kind of war. We’re competitors.

As for blocking mergers, the US blocks mergers and restricts who can do business here and fines folks who violate laws, as does the EU, why should China not have the same authority? The US can object when the EU fines Google 5 Billion dollars or blocks South Korean Mega merger nobody is going to war over it. It’s the price companies pay for access to foreign markets. China like the US and EU is a pretty big market. Good for them, and good for Intel too. Smart move on their part suspending the merger and keeping the Chinese market open to them.

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    The Q is what the US can do, not what Intel can do. Although the premises of the Q that the US and China are in "all out economic war" are bit overstated.
    – Fizz
    Aug 23 at 16:19
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    @Fizz, I implied the question is what should the U.S. do. Answer nothing. What “can” we do is rather unlimited and not bound by merit.
    – user47010
    Aug 23 at 17:20
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    "We aren’t in an economic [...]. We’re competitors.": who is "we" here? Do you mean a specific country, like the USA? If so, please make that clear. These are international sites.
    – terdon
    Aug 24 at 16:16
  • @terdon, to my knowledge nobody is at war with China, So we are all humans outside of China.
    – user47010
    Aug 26 at 12:47

Question is whether China can block any merger deal between a U.S. company and another company even if they don't ship goods or sell services to China

China did not block the merger to which the question refers. That is, they did not actively say "no" to it. They simply did not issue a decision on a request for regulatory approval. Nor did that force the parties involved to kill the deal, but it did set the stage for a bilateral business decision by the parties not to move forward.

But yes, China can apply pressure in favor of or against all manner of business deals, between any parties, anywhere. How effective such pressure can be will depend on the parties and their overall business plans, but direct or indirect threats of fines, asset seizures, denial of permission to conduct business, criminal prosecution, or the like will be highly (de)motivating to some.

whether the U.S. government can do anything to allow a merger to take place even if the companies don't receive regulatory approval to do so.

Nothing prevented the merger in question from taking place. The parties decided to back out.

The U.S. government could conceivably have intervened in favor of the parties by diplomatic means and / or by applying its own economic pressure against China or Chinese companies. Perhaps that would have persuaded China to approve the deal. In principle, the U.S. could even have attempted to apply military force, but in reality that's altogether implausible.

China is sovereign. Washington has no power under law to make or override Beijing's decisions (nor vice versa).


I don't think there's anything the US can do to completely block China from this activity, short of going to war and winning it.

But the US could apply economic pressure on China to try to convince them to reverse their position. They could implement economic sanctions, add tariffs, etc.

Whether it's worth doing anything like this just to get one merger approved is a whole other question. Sanctions are not generally implemented willy-nilly, they're usually reserved as reactions to serious state actions, such as major human-rights violations, war, and attempts to develop nuclear and chemical weapons. Trump was rather free-wheeling in imposing tariffs to try to bolster US manufacturing, but he didn't understand that they had more impact on consumer costs than China's revenues.


whether the U.S. government can do anything to allow a merger to take place even if the companies don't receive regulatory approval

They could run a Special Ops operation to make the merger de facto happen, even if it doesn't happen on paper. Options include:

  1. Corporate espionage: steal all of the technical knowledge from the company in question and covertly provide it to Intel, thus making the merger moot.
  2. Bribery: secretly provide bribes to the stakeholders of the Israeli corporation to hand over the technical knowledge to Intel.
  3. Sabotage: pressure the company's stakeholders to shut down the company, forcing the employees to go work for Intel instead while taking the technical knowledge with them.

Companies are merely a social construct and their entire value can be transferred to other entities with sufficient government efforts. Whether or not this would be worth the US governments time depends on how valuable this merger is for national security.

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    All of that is worthless once you factor in China preventing them from doing anything in the country from manufacturing, to selling things there, or for anyone to sell intel products there. Intel was free to do the merger even if China disagreed with it, they just would have had to deal with the response that China would have for anything they wanted to do in China.
    – Joe W
    Aug 23 at 21:07
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    @JoeW if done correctly there would be full plausible deniability. Though naturally China could still do as they please, with or without the covert operation. Aug 23 at 21:26
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    You think plausible deniability will matter if China decides to block Intel from doing business or anyone from selling intel products in China?
    – Joe W
    Aug 23 at 21:29
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    @JoeW they could do this even without the covert operation. Aug 23 at 21:30
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    I don't understand how this could practically work at the scale of a manufacturing company worth billions of dollars without being beyond comically obvious, which could respond negatively to such deception in the same way they'd respond if the merger simply proceeded. Intel isn't just out to acquire technical knowledge; they'd be acquiring a number of very expensive semiconductor manufacturing facilities, employees, customers, and so on. If all that stuff was suddenly and mysteriously owned by Intel while Tower shareholders received $53/share in cash, that would be extremely conspicuous. Aug 24 at 4:16

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