Intel Corp (INTC.O) has withdrawn its $5.4 billion acquisition bid for Israeli contract chipmaker Tower Semiconductor Ltd (TSEM.TA) as the merger agreement lapsed without Chinese regulatory approval.

Intel will pay a termination fee of $353 million to Tower Semiconductor. The decision reflects growing tensions between the U.S. and China, impacting corporate deals, especially in the tech sector.

Despite these developments, Intel has announced a substantial $25 billion investment in a new Israeli factory, marking the largest-ever foreign investment in the country.

Intel’s foundry business witnessed a surge in revenue to $232 million in Q2. Primarily from “advanced packaging,” a process that combines components of chips to create more powerful ones.

Cooling demand for Intel’s chips post-pandemic growth has prompted the company to implement cost-cutting measures.