SANTA CLARA & NEW YORK — Hedge fund Apollo says it will lead an investment of $11 billion to acquire from Intel a 49% equity interest in a joint venture entity related to Intel’s Fab 34 in Ireland.
The transaction represents Intel’s second Semiconductor Co-Investment Program (SCIP) arrangement. SCIP is an element of Intel’s Smart Capital strategy, a funding approach designed to create financial flexibility to accelerate the company’s strategy, including investing in its global manufacturing operations, while maintaining a strong balance sheet.
Located in Leixlip, Ireland, Fab 34 is Intel’s leading-edge high-volume manufacturing (HVM) facility designed for wafers using the Intel 4 and Intel 3 process technologies. To date, Intel has invested $18.4 billion in Fab 34. This transaction allows Intel to unlock and redeploy to other parts of its business a portion of this investment while continuing the build-out of Fab 34. As part of its transformation strategy, Intel has committed billions of dollars of investments to regaining process leadership and building out leading-edge wafer fabrication and advanced packaging capacity globally.
Under the agreement, the joint venture will have rights to manufacture wafers at Fab 34 to support long-term demand for Intel’s products and provide capacity for Intel Foundry customers. Intel will have a 51% controlling interest in the joint venture. Intel will retain full ownership and operational control of Fab 34 and its assets. The transaction is designed to enhance the company’s strong balance sheet with capital at a cost below Intel’s cost of equity. The investment in the joint venture is expected to be treated as equity-like from a ratings perspective.
“Intel’s agreement with Apollo gives us additional flexibility to execute our strategy as we invest to create the world’s most resilient and sustainable semiconductor supply chain. Our investments in leading-edge capacity in the U.S. and Europe will be critical to meet the growing demand for silicon, with the global semiconductor market poised to double over the next five years,” said David Zinsner, Intel CFO. “This transaction allows us to share our investment with an established financial partner on attractive terms while maintaining our strong investment-grade credit rating.”
Apollo Partner Jamshid Ehsani added, “Apollo is pleased to enter into this joint venture with Intel. This highly strategic capital transaction is among the largest private investments of its kind and showcases Apollo’s ability to provide creative, scaled capital solutions to leading corporations and infrastructure, and to contribute to supply chain resiliency. It also underscores our role as a trusted financing partner, leveraging private capital to help build the New Economy, including next generation AI technology which will require major investments in sustainable power generation, data centers, foundries and semiconductor capabilities.”
Transaction Details
Construction of Fab 34 is largely complete, and high-volume manufacturing of Intel® Core Ultra processors on Intel 4 technology began there in September 2023. The ramp of Granite Rapids, Intel’s next-generation data center product on Intel 3 technology, is also well underway.
The joint venture will manufacture wafers for sale to Intel on a cost-plus-margin basis. Under the agreement, Intel is required to finish the build-out of Fab 34 and purchase wafers from the joint venture for itself and external customers, with minimum volume commitments for its wafer demand following the substantial completion of the facility.
For financial reporting purposes, Intel expects to consolidate results of the joint venture through net income and account for income attributable to the 49% ownership interest in net income (loss) attributable to non-controlling interests. Intel expects net income attributable to such non-controlling interest to be limited in the first two years but to increase thereafter as the factory ramps to full capacity.
The transaction is expected to close in the second quarter of 2024.
