Intel Introduces First-of-its-Kind Semiconductor Co-Investment Program

[btarunr]

Intel Corporation today announced a first-of-its-kind Semiconductor Co-Investment Program (SCIP) that introduces a new funding model to the capital-intensive semiconductor industry. As part of its program, Intel has signed a definitive agreement with the infrastructure affiliate of Brookfield Asset Management, one of the largest global alternative asset managers, which will provide Intel with a new, expanded pool of capital for manufacturing build-outs.

SCIP is a key element of Intel's Smart Capital approach, which aims to provide innovative ways to fund growth while creating further financial flexibility to accelerate the company's IDM 2.0 strategy. Intel's agreement with Brookfield follows the two companies' memorandum of understanding announced in February 2022. Under the terms of the agreement, the companies will jointly invest up to $30 billion in Intel's previously announced manufacturing expansion at its Ocotillo campus in Chandler, Arizona, with Intel funding 51% and Brookfield funding 49% of the total project cost. Intel will retain majority ownership and operating control of the two new leading-edge chip factories in Chandler, which will support long-term demand for Intel's products and provide capacity for Intel Foundry Services (IFS) customers. The transaction with Brookfield is expected to close by the end of 2022, subject to customary closing conditions.



"This landmark arrangement is an important step forward for Intel's Smart Capital approach and builds on the momentum from the recent passage of the CHIPS Act in the U.S.," said David Zinsner, Intel CFO. "Semiconductor manufacturing is among the most capital-intensive industries in the world, and Intel's bold IDM 2.0 strategy demands a unique funding approach. Our agreement with Brookfield is a first for our industry, and we expect it will allow us to increase flexibility while maintaining capacity on our balance sheet to create a more distributed and resilient supply chain."

Sam Pollock, CEO of Brookfield Infrastructure, said, "By combining Brookfield's access to large-scale capital with Intel's industry leadership, we are furthering the advancement of leading semiconductor production capabilities. Leveraging our partnership experience in other industries, we are pleased to come together with Intel in this important investment that will form part of the long-term digital backbone of the global economy."

Benefits of the Transaction
Intel's partnership with Brookfield is expected to enhance the company's strong balance sheet by allowing Intel to tap into a new pool of capital below its cost of equity while protecting its cash and debt capacity for future investments and continuing to fund a healthy and growing dividend. Over the next several years, the structure is expected to provide a $15 billion cumulative benefit to Intel's adjusted free cash flow and is expected to be accretive to Intel's earnings per share during the construction and ramp phase. SCIP provides Intel the ability to replicate the co-investment model with other partners for other build-outs globally.

Intel's Smart Capital Approach
SCIP is an important component of Intel's overall Smart Capital approach, which is designed to allow the company to adjust quickly to opportunities in the market, while managing its margin structure and capital spending. Through SCIP, Intel is accessing strategically aligned capital to increase its flexibility and help efficiently accelerate and scale its manufacturing build-outs. This type of co-investment also shows how private capital is unlocked and becomes a force multiplier for government incentives for semiconductor manufacturing expansion.

• In addition to SCIP, the other key elements of Smart Capital include:
• Smart capacity investments: Intel is aggressively building out relatively low-cost shell space, which gives the company flexibility in how and when it brings additional capacity online based on milestone triggers such as product readiness, market conditions and customer commitments. In 2021, approximately 35% of Intel's capital expenditures was spent on infrastructure.
• Government incentives: Intel is continuing to work with governments in the U.S. and Europe to advance incentives for domestic manufacturing capacity for leading-edge semiconductors. Considerable progress has been made over recent months, as President Biden signed into law the CHIPS and Science Act of 2022 that includes funding for $52 billion in incentives for the U.S. semiconductor industry; the U.S. Congress is making strides with the FABS Act, which will establish a semiconductor investment tax credit in the U.S.; and the European Chips Act has added 15 billion euros to an existing 30 billion euros in public investments to build new infrastructure, among other advancements.
• Customer commitments: IFS is working closely with potential customers, and several have indicated willingness to make advance payments to secure capacity. This provides Intel with the advantage of committed volume, de-risking investments while providing capacity corridors for its foundry customers.
• External foundries: The company intends to continue its use of external foundries where their unique capabilities support Intel's leadership products.

"Intel's Smart Capital actions provide Intel with greater flexibility, reduce overall gross capital needs and act as a tailwind to adjusted free cash flow and gross margin. We expect that SCIP, combined with the other pillars of our Smart Capital approach, will allow us to significantly accelerate our transformation and help deliver the more globally balanced supply chain the world needs," Zinsner concluded.

View at TechPowerUp Main Site

 

[DeathtoGnomes]

Benefits of the Transaction
Intel's partnership with Brookfield is expected to enhance the company's strong balance sheet by allowing Intel to tap into a new pool of capital below its cost of equity while protecting its cash and debt capacity for future investments and continuing to fund a healthy and growing dividend.

This sounds like a 'cover-my-ass' so as not to lose money like Intel did with its venture into dGPUs.

IFS is working closely with potential customers, and several have indicated willingness to make advance payments to secure capacity.

Pay-to-Play so the forge guarantees you place in line and no one else can take cutsies.

Government incentives: Intel is continuing to work with governments in the U.S. and Europe to advance incentives for domestic manufacturing capacity for leading-edge semiconductors. Considerable progress has been made over recent months, as President Biden signed into law the CHIPS and Science Act of 2022 that includes funding for $52 billion in incentives for the U.S. semiconductor industry; the U.S. Congress is making strides with the FABS Act, which will establish a semiconductor investment tax credit in the U.S.; and the European Chips Act has added 15 billion euros to an existing 30 billion euros in public investments to build new infrastructure, among other advancements.

I dont like the chips act ( here or across the pond), it taking taxpayer money and giving it away for the sole purpose of attracting business from those other countries. Its not like there is any real benefit to the end consumer.

 

[phanbuey]

I dont like the chips act ( here or across the pond), it taking taxpayer money and giving it away for the sole purpose of attracting business from those other countries. Its not like there is any real benefit to the end consumer.

In a perfect world where we didn't have ultra-nationalism and sovereign countries getting invaded I would agree with you.

 

[usiname]

Basiclly Intel is taking taxpayers money to build factories that will not create production for Intel cause it looks like they moving all the production to TSMC. Their production will fund the waffers from TSMC cause their node is trash similar to the samsung's node, but the difference is that samsung is not so brazen to steal money while using waffers from their competitor.

In a perfect world where we didn't have ultra-nationalism and sovereign countries getting invaded I would agree with you.

Leaded by the biggest aggressor that destroys foreign companies and economies just because they sell more phones than crapple

 

[phanbuey]

Basiclly Intel is taking taxpayers money to build factories that will not create production for Intel cause it looks like they moving all the production to TSMC. Their production will fund the waffers from TSMC cause their node is trash similar to the samsung's node, but the difference is that samsung is not so brazen to steal money while using waffers from their competitor.


Leaded by the biggest aggressor that destroys foreign companies and economies just because they sell more phones than crapple

You're talking about Samsung, whose CEO was imprisoned for bribery right?

 

[usiname]

You're talking about Samsung, whose CEO was imprisoned for bribery right?

Since when exynos is manifactured by TSMC?

 

[phanbuey]

Since when exynos is manifactured by TSMC?

I was more referring to the brazen stealing of money.

 

[bonehead123]

This reeks of a scheme to get additional capital from an outside source, so they can just pocket the taxpayer-funded CHIPS act money and make it look on paper like they are spending that money for capex projects.... gotta pay for those Exec bonuses, new yachts, LearJets, and Beachfront resorts somehow

 

[Nanochip]

This sounds like a 'cover-my-ass' so as not to lose money like Intel did with its venture into dGPUs.


Pay-to-Play so the forge guarantees you place in line and no one else can take cutsies.


I dont like the chips act ( here or across the pond), it taking taxpayer money and giving it away for the sole purpose of attracting business from those other countries. Its not like there is any real benefit to the end consumer.

Taiwan subsidizes TSMC and TSMC is world class but Taiwan is subject to attack from china. All the USA and Europe are doing is playing catch up to Asia in terms of subsidizing the silicon future. I don’t like corporate welfare either, but it’s a smart move by the EU and USA to try and bring silicon manufacturing back to within their borders. What if Taiwan falls ? What if TSMC is seized ? That affects so many companies …

 

[thesmokingman]

Yea, great fkn idea, squander our money away with a fab that's squandered away a decade in fails.

 

[Space Lynx]

All CPU's still needing to be diffused in Malaysia is the greatest weak point of the entire industry, a single point of failure, if a natural disaster ever occurs there... the world grinds to a complete and utter halt. It's always better having things in pairs and far away from each other.

 

[dozenfury]

The US (and EU ftm) both have a gap in semi-conductors, and the CHIPS Act helps to close that gap, create jobs, and benefit local economies. Intel so far hasn't got any money from CHIPS, and this article explains how they are financing this project. An important note is that the CHIPS Act is capped at $3B per fab, so not anywhere close to the $30B Intel is spending on this. Some people might have the misconception that the government is just giving them $30B from the CHIPS Act to build it, which isn't the case at all. And incentives for new factories is very normal business, that has been the case for decades everywhere in the US in just about every state. You'd be hard pressed to find any states that haven't done mega-incentives for new factories, and that includes Michigan, Texas, Ohio, Wisconsin, North Carolina, etc.

The bigger concern is TSMC essentially being the global supplier and at high-risk of interruption if conflict there breaks out. And that's on top of normal risks like fire, earthquake, etc. TSMC has talked about diversifying their production into Japan, Germany, and/or the US. But until they do or other competitive fabs come online in other geographic locations, it's a very impactful global supply disaster waiting to happen.

 

[mplayerMuPDF]

The US (and EU ftm) both have a gap in semi-conductors, and the CHIPS Act helps to close that gap, create jobs, and benefit local economies. Intel so far hasn't got any money from CHIPS, and this article explains how they are financing this project. An important note is that the CHIPS Act is capped at $3B per fab, so not anywhere close to the $30B Intel is spending on this. Some people might have the misconception that the government is just giving them $30B from the CHIPS Act to build it, which isn't the case at all. And incentives for new factories is very normal business, that has been the case for decades everywhere in the US in just about every state. You'd be hard pressed to find any states that haven't done mega-incentives for new factories, and that includes Michigan, Texas, Ohio, Wisconsin, North Carolina, etc.

The bigger concern is TSMC essentially being the global supplier and at high-risk of interruption if conflict there breaks out. And that's on top of normal risks like fire, earthquake, etc. TSMC has talked about diversifying their production into Japan, Germany, and/or the US. But until they do or other competitive fabs come online in other geographic locations, it's a very impactful global supply disaster waiting to happen.

I think that people would be less upset about things like this if these corporations actually paid their fair share of taxes and there wasn't ever-increasing economic inequality in the Western world, particularly the US. As it stands, it is always those who least need it who get massive assistance from the government, while the genuinely needy are hung out to dry and overall the living standards of the poorer half of society keep decreasing.

 

[SRB151]

Taiwan subsidizes TSMC and TSMC is world class but Taiwan is subject to attack from china. All the USA and Europe are doing is playing catch up to Asia in terms of subsidizing the silicon future. I don’t like corporate welfare either, but it’s a smart move by the EU and USA to try and bring silicon manufacturing back to within their borders. What if Taiwan falls ? What if TSMC is seized ? That affects so many companies …

Yeah, but it's more about Intel sitting on their ass, raking in the profits, and offering small advancements in product performance since they felt they would never be challenged. The only reason they're playing catch up is their own
short sighted perspective. Now, the taxpayers have to foot the bill because they were lazy and or asleep?

I think this grand plan has as much to do with keeping the debt off the books. They took a blood bath on their last earnings report, GPU's so far is a $3.5B black hole, and this foundry service for other customers can be done, but the last try (re: 10nm), burned quite a few of said customers. If they can build a new fab, and show less debt, and be in a position of "if it works, great, if not we're not taking all the risk" it will make them look better to the stock market. The only thing that matters, and the thing that got them in this mess in the first place....driving the stock price.

 

[Tom Yum]

To me this sounds like the first step in Intel spinning off their fabs to a separate entity. Start with 51% ownership (and control) of the new fabs, and then start unwinding that ownership percentage by allowing Brookfield to buy bits of Intel's share, ultimately leading to Intel going fabless but with preferential dealings with their spunoff fab arm (now owned by Brookfield who most likely would offload via IPO into a separate company). Not unlike AMD/Global Foundries, but more gradual (because Intel aren't on the verge of bankruptcy like AMD was).

If Intel had faith in their IDM 2.0 strategy they wouldn't want to share future IDM profits when they have the capital to continue going on their own (especially post-CHIPS act).

 

[Nanochip]

Yeah, but it's more about Intel sitting on their ass, raking in the profits, and offering small advancements in product performance since they felt they would never be challenged. The only reason they're playing catch up is their own
short sighted perspective. Now, the taxpayers have to foot the bill because they were lazy and or asleep?

I think this grand plan has as much to do with keeping the debt off the books. They took a blood bath on their last earnings report, GPU's so far is a $3.5B black hole, and this foundry service for other customers can be done, but the last try (re: 10nm), burned quite a few of said customers. If they can build a new fab, and show less debt, and be in a position of "if it works, great, if not we're not taking all the risk" it will make them look better to the stock market. The only thing that matters, and the thing that got them in this mess in the first place....driving the stock price.

AMD spun off its foundries and farmed manufacturing out to Asia, nVidia, AMD, Apple, Qualcomm, the big dogs, all farm their manufacturing out to Asia. Even if Intel was operating at full tilt on advanced nodes, a large percentage of the CPU/GPU/mobileCPU/GPU compute used in America and Europe is manufactured outside of those borders. I have nothing against Asia, I'm not Asian but I've visited many of those countries and had a great time there. Putting Intel's issues aside, it is a smart play by the governments of the EU/USA to invest billions in silicon manufacturing.

Taiwan has been investing billions of $$ in TSMC... would TSMC be as great as it is today without help from the Taiwanese government?

 

[AusWolf]

I'm starting to believe that Intel isn't mainly a semiconductor manufacturer anymore, but an investment company.