Applied Materials walked away from its planned bid to buy Tokyo Electron for $10 billion on Sunday.
The two companies are the first- and third-largest makers of components that go into semiconductor chips, and would have been worth over $38.5 billion together, according to Reuters.
They had been in talks for 18 months.
Via a statement from Applied Materials:
"The decision came after the U.S. Department of Justice (DoJ) advised the parties that the coordinated remedy proposal submitted to all regulators would not be sufficient to replace the competition lost from the merger. Based on the DoJ's position, Applied Materials and Tokyo Electron have determined that there is no realistic prospect for the completion of the merger."
This is the second major merger attempt to fall in recent days due to concerns about antitrust regulations.
On Friday, Comcast dropped its offer for Time Warner Cable worth $45 billion. There had been concerns that both companies would have had no incentive to improve customer service when they merged. Like the Applied Materials deal, it would also have removed one big competitor from the industry.
Shares of Applied Materials fell by more than 7% in pre-market trading. Applied Materials has a market cap of nearly $27 billion.
In a note Monday, Stifel's Patrick Ho and Brian Chin said they found the announcement "surprising and disappointing," and added that it's likely constant complaints from customers made it difficult for regulators to give the deal a green light.