Intel, Brookfield to invest up to US$30 billion in Arizona fabs

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Intel, Brookfield to invest up to US$30 billion in Arizona fabs

Intel and Canada's Brookfield Asset Management have agreed to jointly fund up to US$30 billion for the United States chipmaker's leading-edge chip factories in Arizona.

The move is the first of the company's Semiconductor Co-Investment Progamme (SCIP) which Intel said introduces a new funding model for capital intensive chip making.

Brookfield's infrastructure affiliate will invest up to US$15 billion for a 49 per cent stake in the expansion project, while Intel will retain majority ownership and operating control of the two fabs making advanced chips in Chandler, Arizona.

In New Zealand, Brookfield owns Vodafone NZ together with Infratil.

The investment is an expansion of an agreement signed by Intel and Brookfield in February to explore finance options to help fund new manufacturing sites.

The two companies didn't disclose specific terms. David Zinsner, Intel's finance chief, told analysts the interest rate was between 4.4 per cent and 8.5 per cent, which is more expensive than debt financing but cheaper than equity financing.

For private capital providers like Brookfield, foundries represent a cash-flow generating investment opportunity resembling private equity investments in infrastructure, such as data centers and fibre, signalling investors' long-term confidence in semiconductor demand.

Through the deal, Intel could preserve debt capacity for other priorities with financing commitment for a multi-year project, while maintaining operational control.

Zinsner expects this could be the first of many similar financing structures the semiconductor industry explores.

The deal also comes after US President Joe Biden this month signing the CHIPS and Science Act into law, which included provision of US$52.7 billion in subsidies for American semiconductor production and research.

Zinsner said the arrangement between the companies "builds on the momentum from the recent passage of the CHIPS Act in the US"

After Pat Gelsinger took over the reins of Intel in early 2021, the company announced multibillion-dollar investments across Europe and in the United States.

They were aimed at increasing Intel's chip production after the industry went through an over two-year long supply crunch that derailed production of cars to computers.

Last month, Intel slashed its annual forecasts due to falling PC demand.

The transaction with Brookfield is expected to close by the end of 2022. Lazard Frères advised Intel on the deal.

Intel and Brookfield have funded a prior Arizona campus, with 51-49 per cent of the project cost respectively.


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