NEW YORK, Sept 5 (Reuters Breakingviews) – Call it conscious uncoupling. On Tuesday, $155 billion chip giant Intel (INTC.O) inked a new partnership with Tower Semiconductor (TSEM.TA), which Intel boss Pat Gelsinger recently gave up on acquiring for $5 billion. The deal will see Tower spend $300 million on equipment at Intel’s New Mexico campus, bolstering Gelsinger’s nascent chip-manufacturing-for-hire services. It’s a smart way to get around regulatory knockbacks that killed the two companies’ planned merger, and makes more sense than that deal.

Intel ended its year-and-a-half-long quest to acquire Tower in August, after failing to win sign-off from Chinese antitrust enforcers. Signed in February 2022, the deal was aimed at strengthening Intel’s pivot into manufacturing chips designed by others by bringing in Tower’s know-how. But weak profitability and sagging results made the acquisition look questionable.

By signing up Tower as a partner, Gelsinger wins a chunk of its business without the trouble of competition roadblocks. Plus there’s a twist. Tower is paying to build up its former suitor’s facilities to build the chips, but squint and the funding really comes from Intel: The company paid Tower a $353 million break fee after their tie-up fell through. Still, better for Intel that the money is used on its own business than someone else’s. Gelsinger has salvaged a minor victory from the jaws of defeat.(By Jonathan Guilford)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Refiles to fix typo in editing byline.)

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