Intel seals $30bn partnership with Brookfield to fund chip factory expansion

Intel has struck a partnership with Brookfield Infrastructure Partners to fund the development of a $30 billion (€30 billion) semiconductor fabrication plant in Arizona, as the chip maker works to finance construction on large domestic manufacturing plants following the approval of landmark semiconductor legislation in the US.

Brookfield is investing $15 billion for a 49 per cent stake in Intel’s expansion of its Arizona site and brings experience in developing infrastructure assets such as transmission lines, data centres and wireless cell towers. Intel, which described the partnership as “a new funding model to the capital-intensive semiconductor industry”, will retain a 51 per cent stake.

“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,” said Intel chief financial officer David Zinsner.

The expansion is part of a concerted effort by Intel to boost chip manufacturing, as the company seeks to take back market share from groups such as TSMC in Taiwan and South Korea’s Samsung.

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By taking in the Canadian asset management group as a large private capital partner, Intel said the deal would provide it with the financial flexibility to continue funding its rising dividend. The partnership is expected to bolster Intel’s free cash flow by $15 billion over the next several years, the company said.

Tax credits

The announcement comes on the heels of the passage of US president Joe Biden’s Chips Act earlier in August, which included $52 billion in incentives for the US semiconductor industry. Congress is also considering another piece of legislation to establish tax credits for semiconductor investments inside the US.

“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 US,” said Mr Zinsner.

Intel has two plants under construction at its site in Chandler, Arizona, which are expected to come online in 2024. It announced plans this year to invest $20 billion to build two chip factories at a new site in Ohio. The company has also said it plans to pour $30 billion into chip manufacturing in Europe, utilising state subsidies to build a new plant in the German city of Magdeburg.

Intel surprised investors last month when it reported a sharp drop in revenues and slashed its outlook for the financial year, attributing the weaker than anticipated performance to supply chain disruptions, worsening economic conditions and pressure from competitors.

Intel shares have fallen more than 35 per cent this year. Shares were up 1.5 per cent in trading on Tuesday morning. — Copyright The Financial Times Limited 2022