Intel Corp. is expected to call off its planned $5.4 billion acquisition of Tower Semiconductor Ltd. as time to win regulatory approval runs out, according to people familiar with the matter.

The deadline for the transaction, announced in early 2022, is midnight California time on Aug. 15 and the companies don’t anticipate getting approval from China by that time, said the people, who asked not to be identified because the details are private.

A representative for Intel declined to comment on the approaching deadline, while Tower didn’t immediately respond to a request for comment.

The purchase of the Israeli company was part of Intel Chief Executive Officer Pat Gelsinger’s plan to get into a faster-growing part of the semiconductor industry, the foundry market dominated by Taiwan Semiconductor Manufacturing Co. Tower has a relatively small presence in that area — where companies make chips for clients on a contract basis — but has expertise and customers that Intel lacks.

Read More: Intel to Buy Israel’s Tower Semiconductor for $5.4 Billion

Investors had already discounted the chances of the deal being completed. US-traded shares of Tower have declined 22% this year, even as the broader semiconductor industry saw stocks soar. It closed Tuesday at $33.78 — far below the $53 a share that Intel had offered.

Sanford C. Bernstein analyst Stacy Rasgon said the deal’s failure wouldn’t be a huge surprise given the slide in Tower’s share price, but it would be a setback for Intel.

“A failed deal does seem modestly disappointing for the prospects of Intel’s foundry efforts,” he wrote in a research note after Bloomberg’s story. “Overall Intel’s foundry efforts were never going to be easy even with Tower, but now may prove to be even more challenging without.”

When the transaction was first announced in February of last year, Intel said it would take “about 12 months.” As of October, the chipmaker said it was targeting the first quarter 2023, but then in March warned that the date might slip into the second quarter.

Increasing tension between China and the US has made it harder to secure approval for transactions that require signoff from regulators in Beijing and Washington, particularly when the deals involve semiconductors, a key area of friction.

Tower is a fraction of the size of Intel and TSMC in terms of revenue, but it makes components for big customers such as Broadcom Inc. Intel’s plan was to combine plants with Tower and tap its customer list. Though Tower-made chips don’t require the state-of-the-art production techniques that an Intel or Nvidia Corp. processor demands, they serve growing markets like electric vehicles.

--With assistance from Peter Elstrom.

(Updates with analyst comment from sixth paragraph)