Intel and Apollo Agree to Joint Venture Related to Intel’s Fab 34 in Ireland
Intel and Apollo have entered into a $11 billion joint venture for Intel's Fab 34 in Ireland. Apollo will acquire a 49% equity stake, while Intel retains 51% control. This is Intel's second SCIP arrangement, enhancing financial flexibility and supporting global manufacturing strategy. Fab 34, a state-of-the-art facility, began manufacturing processors in September 2023. The deal, expected to close by Q2 2024, allows Intel to redeploy capital and maintain its credit rating. Intel will continue to manage Fab 34 and fulfill wafer production commitments for itself and foundry customers.
- Intel secures $11 billion investment from Apollo, boosting financial flexibility.
- Intel retains 51% control and full operational management of Fab 34.
- Fab 34 began high-volume manufacturing of Core Ultra processors in September 2023.
- Investment supports Intel's strategy to build resilient semiconductor supply chains.
- Transaction expected to close by Q2 2024, ensuring timely financial infusion.
- Intel's balance sheet remains strong due to the cost-effective capital infusion.
- Joint venture will manufacture wafers for both Intel and foundry customers.
- Enhances Intel's Smart Capital strategy, optimizing investments while maintaining credit rating.
- Intel to defer some of its $18.4 billion investment in Fab 34.
- Significant dependence on Apollo-managed funds, creating potential financial risk.
- Obligations to minimum volume commitments for wafer production could strain resources.
- Net income attributable to non-controlling interest expected to increase after two years, affecting net profit margins.
Insights
Intel's decision to engage in an $11 billion joint venture with Apollo represents a significant move to enhance their financial flexibility and maintain a strong balance sheet. By selling a 49% equity interest in Fab 34, Intel aims to unlock capital while still retaining operational control and a majority stake. This allows Intel to redeploy resources into other strategic areas without compromising the build-out of Fab 34.
From a financial standpoint, this transaction bolsters Intel's balance sheet without diluting its equity excessively. This strategic move aligns with Intel's 'Smart Capital' approach, which is designed to optimize financial efficiency and support accelerated manufacturing investments. Investors should note that Intel expects limited net income from the joint venture in the initial years, indicating a focus on long-term gains rather than immediate returns.
Such a sizeable investment from Apollo underscores market confidence in Intel's strategic vision and its potential to regain process leadership. However, the reliance on external funds indicates the capital-intensive nature of semiconductor manufacturing, often requiring substantial investments to stay competitive in the industry.
It's important for investors to monitor how this additional financial flexibility translates into tangible advancements in Intel's manufacturing capabilities and market position.
Intel's joint venture with Apollo is a strategic move aimed at bolstering its semiconductor manufacturing capacity, particularly in the context of Fab 34's advanced Intel 4 and Intel 3 process technologies. These technologies are critical for high-performance computing applications, including next-generation AI and data centers.
The use of extreme ultraviolet lithography (EUV) in Fab 34 marks a significant technological milestone for Intel, enhancing its ability to produce smaller, more efficient chips. This positions Intel competitively against other semiconductor giants like TSMC and Samsung, who are also investing heavily in EUV technology.
By maintaining operational control and a 51% stake, Intel ensures that it can steer the technological direction and meet its strategic needs, while Apollo's investment provides the needed capital to accelerate these efforts. This move could be particularly beneficial as the global semiconductor market is expected to double over the next five years, driven by increasing demand for advanced computing technologies.
Investors should watch for how effectively Intel leverages this partnership to scale its manufacturing capabilities and whether it can meet the growing demand for advanced semiconductor technologies.
From a market perspective, Intel’s joint venture with Apollo is a forward-thinking move designed to secure its market position amidst growing global demand for semiconductors. This transaction allows Intel to share investment risk with Apollo while ensuring the continued expansion of its manufacturing footprint in Europe.
Notably, this venture is part of Intel's broader 'Smart Capital' strategy, which includes government incentives and strategic use of external foundries. This diversified approach aims to create a resilient and geographically balanced semiconductor supply chain, which is increasingly critical in light of recent supply chain disruptions.
Investors should consider the implications of Intel's strategy to enhance its production capacity and its potential to meet future demand. The emphasis on sustainability and building out new economy infrastructure, as highlighted by Apollo, reflects broader industry trends towards more sustainable and robust supply chains.
It will be essential to track Intel's progress in ramping up production at Fab 34 and its ability to meet its wafer demand commitments. This joint venture could significantly impact Intel’s market share and competitive standing in the semiconductor industry.
Intel and Apollo announce a definitive agreement under which Apollo-managed funds and affiliates will lead an investment of
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,
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
“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
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
The transaction is expected to close in the second quarter of 2024.
Intel’s Smart Capital Approach
Smart Capital provides financial guardrails and acceleration to return Intel to process technology and product leadership. In addition to SCIP, other elements of Smart Capital include: 1) government incentives to provide a level playing field for building a geographically diverse and resilient semiconductor supply chain; 2) build-out of shell space, which gives the company the flexibility to determine how and when to bring additional capacity online; 3) customer participation in internal capacity build-outs as Intel executes its foundry strategy; and 4) strategic and opportunistic use of external foundries.
Intel’s SCIP program has supported the company’s period of accelerated manufacturing investment that commenced in early 2021. With the signing of this second SCIP agreement, the company is not contemplating further SCIP transactions in the near term.
Intel’s Manufacturing Footprint in
Intel celebrated the opening of Fab 34 in
Advisors
Goldman Sachs & Co. acted as lead financial advisor to Intel and Skadden, Arps, Slate, Meagher & Flom LLP and Eversheds Sutherland served as legal counsel to Intel. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to the Apollo-managed funds and affiliates, while Latham & Watkins LLP is serving as legal counsel to Apollo co-investors.
Forward-Looking Statements
This release contains forward-looking statements regarding the Intel’s expectations regarding the agreement with Apollo, including with respect to the impact on its business and strategy and financial condition, its ability to unlock and redeploy a portion of its investment in Fab 34, the anticipated closing and implications of the transaction, the future impact to its results of operations, its expectations as to the cost of capital and treatment of Apollo’s investment in the joint venture as equity-like from a rating perspective, and the build-out and ramping of Fab 34. Such statements involve many risks and uncertainties that could cause the actual results or outcomes to differ materially from those expressed or implied, including those associated with:
- the high level of competition and rapid technological change in Intel’s industry;
- the significant long-term and inherently risky investments Intel is making in R&D and manufacturing facilities that may not realize a favorable return;
- the complexities and uncertainties in developing and implementing new semiconductor products and manufacturing process technologies;
- Intel’s ability to time and scale its capital investments appropriately and successfully secure favorable alternative financing arrangements and government grants;
- implementing new business strategies and investing in new businesses and technologies;
- changes in demand for Intel’s products;
-
macroeconomic conditions and geopolitical tensions and conflicts, including geopolitical and trade tensions between the US and
China , the impacts ofRussia's war onUkraine , tensions and conflict affectingIsrael and theMiddle East , and rising tensions between mainlandChina andTaiwan ; - the evolving market for products with AI capabilities;
- Intel’s complex global supply chain, including from disruptions, delays, trade tensions and conflicts, or shortages;
- product defects, errata and other product issues, particularly as Intel develops next-generation products and implements next-generation manufacturing process technologies;
- potential security vulnerabilities in Intel’s products;
- increasing and evolving cybersecurity threats and privacy risks;
- IP risks including related litigation and regulatory proceedings;
- the need to attract, retain, and motivate key talent;
- strategic transactions and investments;
- sales-related risks, including customer concentration and the use of distributors and other third parties;
- Intel’s significantly reduced return of capital in recent years;
- Intel’s debt obligations and ability to access sources of capital;
- complex and evolving laws and regulations across many jurisdictions;
- fluctuations in currency exchange rates;
- changes in Intel’s effective tax rate;
- catastrophic events;
- environmental, health, safety, and product regulations;
- Intel’s initiatives and new legal requirements with respect to corporate responsibility matters; and
- other risks and uncertainties described in Intel’s 2023 Form 10-K and other filings with the SEC.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in the documents Intel files from time to time with the SEC that disclose risks and uncertainties that may affect its business.
Unless specifically indicated otherwise, the forward-looking statements in this report are based on Intel management's expectations as of the date of this report, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable. Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.
About Intel
Intel (Nasdaq: INTC) is an industry leader, creating world-changing technology that enables global progress and enriches lives. Inspired by Moore’s Law, we continuously work to advance the design and manufacturing of semiconductors to help address our customers’ greatest challenges. By embedding intelligence in the cloud, network, edge and every kind of computing device, we unleash the potential of data to transform business and society for the better. To learn more about Intel’s innovations, go to newsroom.intel.com and intel.com.
About Apollo
Apollo is a high-growth, global alternative asset manager. In our asset management business, we seek to provide our clients excess return at every point along the risk-reward spectrum from investment grade to private equity with a focus on three investing strategies: yield, hybrid, and equity. For more than three decades, our investing expertise across our fully integrated platform has served the financial return needs of our clients and provided businesses with innovative capital solutions for growth. Through Athene, our retirement services business, we specialize in helping clients achieve financial security by providing a suite of retirement savings products and acting as a solutions provider to institutions. Our patient, creative, and knowledgeable approach to investing aligns our clients, businesses we invest in, our employees, and the communities we impact, to expand opportunity and achieve positive outcomes. As of March 31, 2024, Apollo had approximately
© Intel Corporation. Intel, the Intel logo and other Intel marks are trademarks of Intel Corporation or its subsidiaries. Other names and brands may be claimed as the property of others.
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Kylie Altman
Intel Investor Relations
1-916-356-0320
kylie.altman@intel.com
Sophie Won
Intel Media Relations
1-408-653-0475
sophie.won@intel.com
Noah Gunn
Apollo, Global Head of Investor Relations
1-212-822-0540
IR@apollo.com
Joanna Rose
Apollo, Global Head of Corporate Communications
1-212-822-0491
communications@apollo.com
Source: Intel Corporation
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