Intel this week introduced a new Semiconductor Co-Investment Program (SCIP) that works with investment partners to build new manufacturing facilities. This is a sharp departure from the company’s traditional stance of outright owning the logic fab. As part of the SCIP initiative, Intel has already signed an agreement with Brookfield Asset Management. The deal offers Intel about $15 billion to build a new fab in Arizona in exchange for his 49% stake in the project. Additionally, a similar co-investment model will be used for other fabs in the future.
New fabs are getting more expensive
Intel’s announcement last year of its plans to produce chips for other companies (and to become largely a contract manufacturer of semiconductors) marked a major shift in the company’s business strategy, with Intel looking beyond just itself to the future. For your customers too. However, modern fabs are very expensive because new manufacturing tools such as modern extreme ultraviolet (EUV) lithography scanners are prohibitively expensive.
In order to have sufficient production capacity for its own products and fabless customers in the medium term future, Intel has had to engage in several capital-intensive projects. Ireland (This is probably done); Two new fabs — Fab 52 and Fab 62 — Ocotillo Site Near Chandler, Arizona, it was expected to cost $20 billion. An all-new semiconductor production campus in Ohio, he initially needed $20 billion, is the size of a small town, and will cost up to $100 when fully built. An all-new production facility near Magdeburg, Germany (requires an investment of €17 billion).
Intel will get billions of dollars in incentives from local governments and subsidies from the US and German federal governments to build these fabs. But his newest EUV-ready semiconductor fabrication facility will cost about $10 billion (a massive gigafab capable of starting 100,000 wafers per month costs over $20 billion). . As such, funding these projects is especially difficult for Intel. As such, the company has decided to participate in a joint investment program with Brookfield to build a new facility in Arizona.
Intel retains majority ownership
Under the terms of the agreement, the companies will co-invest $30 billion in ongoing expansion of the site, with Intel funding 51% and Brookfield contributing 49% of the total project cost. Previously, Intel had planned to invest his $20 billion in Fab 52 and Fab 62, but combined with Brookfield, the total increased to $30 billion for him. Intel will not only have access to additional funding, but will also be able to leverage Brookfield’s experience in developing infrastructure assets.
By working with Brookfield, Intel will have $15 billion in free cash flow, allowing Intel to invest more in new fabs without adding new debt. It also allows Intel to “continue to fund a healthy and growing dividend” while investing more in other projects. Meanwhile, $15 billion in earnings “is expected to increase Intel’s earnings per share during the construction and start-up phases.”
Perhaps a key part of this announcement is the fact that Intel plans to strike similar deals with co-investors in the future. Intel will retain majority ownership and operational control of the chip fabs, but not 100%. Previously, he was rarely involved in joint ventures, the most notable exception being IMFT, the company’s NAND flash joint venture with Micron, where since the early 2010s he has co-invested with ASML customers. I was in the program.
Intel CFO David Zinsner said: “Semiconductor manufacturing is one of the world’s most capital-intensive industries, and Intel’s bold IDM 2.0 strategy requires a unique financing approach.The agreement with Brookfield is the first of its kind in the industry. And we expect to be able to maintain it while increasing its flexibility.We have the ability to create a more decentralized and resilient supply chain on our balance sheet.”
Joint ownership of semiconductor manufacturing equipment is not uncommon in the industry. China’s Semiconductor Manufacturing International Corporation (SMIC) is investing in new fabs with local governments in various Chinese provinces, various asset management companies and/or investment banks (many of which are controlled by the Chinese federal government). increase. GlobalFoundries was jointly owned by AMD and Mubadala, but the chip developer needed funding, so Mubadala acquired his AMD stake. Still, the co-investment program is particularly new to Intel, which has always owned his 100% of the manufacturing facility. Ultimately, semiconductor production seems to be getting more expensive, but everything has a beginning.