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Intel’s $11bn Irish factory deal underpins 6,500 jobs as it seeks to regain mojo

Company has been struggling to play catch-up in AI chips arms race currently led by Nvidia

Visitors in the clean room at the official September of Intel's Fab 34 facility in Leixlip in September 2023. Photograph: Alan Betson/The Irish Times

Joe Brennan
Wed Jun 5 2024 - 12:42

US computer semiconductors giant Intel, which employs 6,500 in the Republic, has seen the gradual loss of its mojo in recent decades accelerated in the past 18 months by the frenzy surrounding artificial intelligence (AI) chips developed by Nvidia and Advanced Micro Devices (AMD).

But news on Tuesday evening that it had struck a deal to sell a 49 per cent stake in its new Fab 34 manufacturing facility in Leixlip, Co Kildare for $11 billion (€10 billion) to US private equity giant Apollo frees up money to help finance a turnaround in its fortunes.

Intel may remain the largest maker of chips known as central processing units (CPUs) in the US, but its focus remains on the PC and laptop industry, which has been in decline for some time.

Efforts to muscle in to the smartphone chips design business ended with a white flag being raised eight years ago. More recently, Intel has been struggling to play catch-up in the AI chips arms race that is currently being led by Nvidia.

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This time four years ago, Intel’s market value was bigger than that of Nvidia. However, its shares have slid by more than half since then to leave it with an equity capitalisation of less than $128 billion (€118 billion).

The value of its Santa Clara neighbour in the heart of Silicon Valley, meanwhile, has soared thirteenfold to $2.86 trillion as tech giants such as Meta, Microsoft and Google snap up as many of its AI chips as possible.

[ The three big questions over Intel selling 49 per cent of its new Leixlip plant ]

Adding insult to injury, Intel’s historic distant rival in the PC space, AMD, which has become the number two player in the mushrooming market for AI chips for data centres, is now twice its value.

However, on Tuesday, Intel chief executive Pat Gelsinger announced the start of a fightback at the Computex convention, one of the most important high-tech trade shows in the world, saying he is slashing the cost of products from its own AI accelerator chip programme, Gaudi, which until now has been something of an also-ran. He also unveiled a new AI chip for data centres, called the Xeon 6 processor.

But the central plank of a turnaround plan that Gelsinger has being working on in recent years is a bid to make Intel a much bigger player in the contract manufacturing market for other companies’ chips. (Unlike chip designers Nvidia and AMD, Intel not only develops but manufactures semiconductors.)

The aim is to regain manufacturing market share that had been ceded in recent decades to the likes of Taiwan Semiconductor Manufacturing Company and Samsung.

[ Intel secures $11bn from Apollo Global for 49% of Leixlip plant ]

The reboot is being boosted by chips subsidies on offer on both sides of the Atlantic as the US and EU bid to reduce dependence – for a variety or reasons – on Asian imports for crucial tech components.

The new, almost complete Fab 34 leading-edge high-volume manufacturing facility in Leixlip, which has cost Intel $18.4 billion to date, together with mega projects in development in the US and Magdeburg, Germany, are key to the plan.

Intel’s outsourced manufacturing – or foundry – division made a $7 billion loss last year, up from about $5 billion for each of the two previous years.

The Apollo deal in Ireland – which follows on from Intel selling a 49 per cent stake in a chips plant in Arizona to Canada’s Brookfield Infrastructure Partners – gives the US giant additional financial flexibility and protects its credit rating as it chases rivals that have stolen marches on the AI chips and manufacturing fronts.

It also underpins some 6,500 jobs in Co Kildare, including those working in Intel’s Fab 24 plant, which will remain wholly owned by the tech group.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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