The transaction represents Intel’s second Semiconductor Co-Investment Program (SCIP) arrangement which is part of the company’s Smart Capital strategy, a funding approach that looks to create much greater financial flexibility when it comes to investing in its global manufacturing operations.
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 $18.4bn in the facility. The agreement with Apollo 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 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 and will retain full ownership and operational control of Fab 34 and its assets. The transaction is designed to enhance the company’s balance sheet.
“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 US 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.”
According to Apollo Partner Jamshid Ehsani, “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.”
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 centre 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.
The transaction is expected to close in the second quarter of 2024.
