Intel Corp (the world’s biggest semiconductor chip manufacturer by revenue) and Canada’s Brookfield Asset Management (one of the world’s leading alternative investment management companies) agreed to jointly fund up to $30 billion for the U.S. chipmaker’s leading-edge chip factories in Arizona.
This deal comes after U.S. President Joe Biden signed the CHIPS and Science Act into law, which included a provision of $52.7 billion in subsidies for U.S. semiconductor creation and research.
Features of this deal for Arizona
- Brookfield’s infrastructure affiliate will invest up to $15 billion for a 49% stake in this project, while Intel will retain majority ownership and operating management of the two chip factories meant to make advanced chips in Chandler, Arizona. This investment is part of a deal between Intel and Brookfield in February this year to analyze project finance alternatives to help fund new Intel manufacturing sites.
- Through this deal, Intel could conserve debt capacity for other priorities with financing commitment for a multi-year project, while maintaining operational control.
- For private capital providers like Brookfield, foundries depict a cash-flow generating investment opportunity corresponding to private equity investments in infrastructure, such as data centers and fiber, motioning investors’ long-term confidence in semiconductor need.
The pact between the businesses “builds on the momentum from the recent enactment of the CHIPS Act in the U.S.,” according to David Zinsner, Intel’s finance director.
Acting more for the semi-conductor industry
The two companies didn’t publicize specific terms, but Zinsner told analysts the interest rate was between 4.4% and 8.5%, which is more costly than debt financing but cheaper than equity financing. Zinsner also expects this could be the first of multiple similar financing structures the semiconductor industry explores.
After Pat Gelsinger took over the reins of Intel in early 2021, the company announced multibillion-dollar investments across Europe and the United States. These were aimed at increasing Intel’s chip production after the industry went through an over two-year-long supply crunch that derailed the production of cars to computers.
The transaction with Brookfield is expected to close by the end of 2022. Lazard Frères advised Intel on the deal.
Intel wants to create a world-changing technology
Due to Intel’s vision of creating world-changing technology that improves the life of every person on the planet and Brookfield’s of being invested in long-life, high-quality assets and businesses around the world, we can assume that this deal is for the greater good
The advantages for customers are longer-term, and for bleeding-edge chips on the latest manufacturing process, this will definitely improve supply.
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