• Intel signs deal with Brookfield to jointly invest up to $30 billion in state-of-the-art chip factories in Arizona

SANTA CLARA, Calif. – Intel Corp. launched a first-of-its-kind Semiconductor Co-Investment Program (SCIP), which introduces a new financing model to the capital-intensive semiconductor industry. As part of its program, Intel has signed a definitive agreement with the infrastructure subsidiary of Brookfield Asset Management, one of the world’s largest alternative asset managers, which will provide Intel with a new and expanded capital pool for constructions. Manufacturing.

SCIP is a key part of Intel’s Smart Capital approach, which aims to provide innovative ways to finance growth while creating additional 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 the previously announced manufacturing expansion. by Intel at its Ocotillo campus in Chandler, Arizona, with Intel financing 51% and Brookfield financing 49% of the total project cost. Intel will retain majority ownership and operating control of the two new state-of-the-art chip factories in Chandler, which will meet long-term demand for Intel’s products and provide capacity for Intel Foundry Services customers ( ifs). The transaction with Brookfield is expected to close by the end of 2022, subject to customary closing conditions.

“This historic agreement is an important step forward for Intel’s Smart Capital approach and builds on the momentum of the recent passage of the CHIPS Act in the United States,” said David Zinsner, Chief Financial Officer of Intel. ‘Intel. “Semiconductor manufacturing is one of the most capital-intensive industries in the world, and Intel’s bold IDM 2.0 strategy requires a unique financing approach. Our agreement with Brookfield is a first for our industry, and we expect it will allow us to increase flexibility while maintaining the capacity of our balance sheet to create a more distributed and resilient supply chain.

Sam Pollock, CEO of Brookfield Infrastructure, said, “Combining Brookfield’s access to large-scale capital with Intel’s industry leadership, we are driving the advancement of core semiconductor manufacturing capabilities. Leveraging our partnership experience in other industries, we are excited to partner with Intel on this important investment that will be part of the long-term digital backbone of the global economy.

Advantages of the operation

Intel’s partnership with Brookfield is expected to improve 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 leverage capacity for future investments. and continuing to fund a healthy and growing dividend. Over the next few years, the structure is expected to provide a cumulative benefit of $15 billion to Intel’s adjusted free cash flow and is expected to be accretive to Intel’s earnings per share during the build and ramp phase. SCIP offers Intel the ability to replicate the co-investment model with other partners for other developments globally.

Intel’s Smart Capital Approach

SCIP is an important part of Intel’s overall Smart Capital approach, which is designed to enable the company to quickly adapt to market opportunities, while managing its margin structure and capital expenditures. Through SCIP, Intel accesses strategically aligned capital to increase flexibility and effectively help accelerate and scale its manufacturing builds. This type of co-investment also shows how private capital is freed up and becomes a force multiplier for government incentives to expand semiconductor manufacturing.

In addition to SCIP, other key components of Smart Capital include:

  • Smart capacity investments: Intel is aggressively building relatively inexpensive shell space, giving the company flexibility in how and when to bring additional capacity online based on stage triggers such as product readiness, market conditions and customer commitments. In 2021, about 35% of Intel’s capital expenditures went to infrastructure.
  • Government incentives: Intel continues to work with governments in the United States and Europe to advance incentives for domestic manufacturing capability of advanced semiconductors. Tremendous progress has been made in recent months, as President Biden signed into law the CHIPS and Science Act of 2022, which provides $52 billion in incentive funding for the US semiconductor industry; the US Congress is making great strides with the FABS Act, which will establish a US semiconductor investment tax credit; and the EU Chip Act added €15 billion to the existing €30 billion of public investment to build new infrastructure, among other advances.
  • Customer commitments: IFS is working closely with potential customers, and several have indicated a willingness to make advance payments to secure capacity. This offers Intel the advantage of committed volume, reducing investment risk while providing capacity corridors to its foundry customers.
  • External foundries: The company intends to continue to use external foundries where their unique capabilities support Intel’s flagship products.