Leixlip, Ireland/ NY/ Santa Clara Calif. — Intel Corpo­ra­tion and Apollo announ­ced a defi­ni­tive agree­ment under which Apollo-mana­ged funds and affi­lia­tes will make an $11 billion invest­ment to acquire from Intel a 49% inte­rest in a joint venture rela­ted to Intel’s Fab 34.

The tran­sac­tion is Intel’s second agree­ment under the Semi­con­duc­tor Co-Invest­ment Program (SCIP). SCIP is an element of Intel’s smart capi­tal stra­tegy, a finan­cing approach desi­gned to create finan­cial flexi­bi­lity to acce­le­rate the company’s stra­tegy, inclu­ding invest­ments in its global manu­fac­tu­ring opera­ti­ons, while main­tai­ning a strong balance sheet.

Fab 34 is loca­ted in Leixlip, Ireland, and is Intel’s state-of-the-art high volume manu­fac­tu­ring (HVM) faci­lity for wafers manu­fac­tu­red using Intel 4 and Intel 3 process tech­no­lo­gies. To date, Intel has inves­ted 18.4 billion dollars in Fab 34. This tran­sac­tion will allow Intel to free up some of these invest­ments and rede­ploy them to other busi­ness areas while conti­nuing the expan­sion of Fab 34. As part of its restruc­tu­ring stra­tegy, Intel has inves­ted billi­ons of dollars to regain process leader­ship and build global capa­city for the manu­fac­ture of leading-edge wafers and advan­ced packaging.

Under the terms of the agree­ment, the joint venture will receive the rights to manu­fac­ture wafers in Fab 34 to meet the long-term demand for Intel’s products and provide capa­city for Intel Foundry’s custo­mers. Intel will hold a 51% majo­rity stake in the Joint Under­ta­king. Intel will retain full owner­ship and opera­tio­nal control of Fab 34 and its assets. The tran­sac­tion is inten­ded to improve the company’s solid balance sheet with capi­tal at a price below Intel’s cost of equity. It is expec­ted that the invest­ment in the joint venture will be trea­ted as equity-like from a ratings perspective.

“The agree­ment between Intel and Apollo provi­des us with addi­tio­nal flexi­bi­lity in execu­ting our stra­tegy to create the most resi­li­ent and sustainable semi­con­duc­tor supply chain in the world. Our invest­ments in state-of-the-art capa­city in the U.S. and Europe will be criti­cal to meeting the growing demand for sili­con as the global semi­con­duc­tor market doubles in the next five years,” said David Zins­ner, Intel’s CFO. “It also unders­cores our role as a trus­ted finan­cing part­ner lever­aging private capi­tal to build the new economy, inclu­ding next-gene­ra­tion AI tech­no­logy that will require major invest­ments in sustainable energy gene­ra­tion, data centers, found­ries and semi­con­duc­tor capacity.”

Details of the transaction

Cons­truc­tion of Fab 34 is largely complete, and large-scale produc­tion of Intel® Core™ Ultra proces­sors on Intel 4 tech­no­logy began there in Septem­ber 2023. The ramp-up of Granite Rapids, Intel’s next-gene­ra­tion data center product based on Intel 3 tech­no­logy, is also in full swing.

The joint venture will manu­fac­ture wafers for sale to Intel on a cost-plus-margin basis. Under the agree­ment, Intel is obli­ged to complete the expan­sion of Fab 34 and to purchase wafers from the joint venture for itself and for exter­nal custo­mers, with mini­mum quan­ti­ties for wafer requi­re­ments being promi­sed once the plant has been completed.

For the purpo­ses of finan­cial report­ing, Intel expects to conso­li­date the results of the joint venture via the net result and to include the result attri­bu­ta­ble to the 49% inte­rest in the net result of non-control­ling inte­rests. Intel assu­mes that the net profit attri­bu­ta­ble to non-control­ling inte­rests will be limi­ted in the first two years, but will increase there­af­ter as the factory is fully utilized.

Intel’s manu­fac­tu­ring sites in Ireland

Intel cele­bra­ted the opening of Fab 34 in Ireland in Septem­ber 2023, marking the first use of extreme ultra­vio­let (EUV) litho­gra­phy in high-volume manu­fac­tu­ring in Europe. Fab 34 is desi­gned for the high-volume produc­tion of Intel 3 and Intel 4 tech­no­lo­gies. In addi­tion to Fab 34, Intel has a second manu­fac­tu­ring faci­lity in Leixlip, Fab 24, which is an important site for the produc­tion of Intel’s 14-nano­me­ter sili­con micro­pro­ces­sors and is also prepa­ring to support Intel foundry custo­mers. The tran­sac­tion with Apollo rela­tes only to Fab 34.

Consul­tant

Gold­man Sachs & Co. acted as lead finan­cial advi­sor to Intel, while Skad­den, Arps, Slate, Meag­her & Flom LLP and Ever­s­heds Suther­land acted as legal advi­sors to Intel.

The law firm of Paul, Weiss, Rifkind, Whar­ton & Garri­son LLP is advi­sing the funds and affi­lia­tes mana­ged by Apollo, while Latham & Watkins LLP is provi­ding legal advice to Apollo’s co-inves­tors.