Intel Corporation (Nasdaq: INTC) and Apollo (NYSE: APO) today
announced a definitive agreement under which Apollo-managed funds
and affiliates will lead an investment of $11 billion to acquire
from Intel a 49% equity interest in a joint venture entity related
to Intel’s Fab 34.
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Intel and Apollo announce a definitive
agreement under which Apollo-managed funds and affiliates will lead
an investment of $11 billion to acquire from Intel a 49% equity
interest in a joint venture entity related to Intel’s Fab 34 in
Leixlip, Ireland. (Graphic: Business Wire)
The transaction represents Intel’s second Semiconductor
Co-Investment Program (SCIP) arrangement. SCIP is an element of
Intel’s Smart Capital strategy, a funding approach designed to
create financial flexibility to accelerate the company’s strategy,
including investing in its global manufacturing operations, while
maintaining a strong balance sheet.
Located in Leixlip, Ireland, Fab 34 is Intel’s leading-edge
high-volume manufacturing (HVM) facility designed for wafers using
the Intel 4 and Intel 3 process technologies. To date, Intel has
invested $18.4 billion in Fab 34. This transaction allows Intel to
unlock and redeploy to other parts of its business a portion of
this investment while continuing the build-out of Fab 34. As part
of its transformation strategy, Intel has committed billions of
dollars of investments to regaining process leadership and building
out leading-edge wafer fabrication and advanced packaging capacity
globally.
Under the agreement, the joint venture will have rights to
manufacture wafers at Fab 34 to support long-term demand for
Intel’s products and provide capacity for Intel Foundry customers.
Intel will have a 51% controlling interest in the joint venture.
Intel will retain full ownership and operational control of Fab 34
and its assets. The transaction is designed to enhance the
company’s strong balance sheet with capital at a cost below Intel’s
cost of equity. The investment in the joint venture is expected to
be treated as equity-like from a ratings perspective.
“Intel’s agreement with Apollo gives us additional flexibility
to execute our strategy as we invest to create the world’s most
resilient and sustainable semiconductor supply chain. Our
investments in leading-edge capacity in the U.S. and Europe will be
critical to meet the growing demand for silicon, with the global
semiconductor market poised to double over the next five years,”
said David Zinsner, Intel CFO. “This transaction allows us to share
our investment with an established financial partner on attractive
terms while maintaining our strong investment-grade credit
rating.”
Apollo Partner Jamshid Ehsani added, “Apollo is pleased to enter
into this joint venture with Intel. This highly strategic capital
transaction is among the largest private investments of its kind
and showcases Apollo’s ability to provide creative, scaled capital
solutions to leading corporations and infrastructure, and to
contribute to supply chain resiliency. It also underscores our role
as a trusted financing partner, leveraging private capital to help
build the New Economy, including next generation AI technology
which will require major investments in sustainable power
generation, data centers, foundries and semiconductor
capabilities.”
Transaction Details
Construction of Fab 34 is largely complete, and high-volume
manufacturing of Intel® Core™ Ultra processors on Intel 4
technology began there in September 2023. The ramp of Granite
Rapids, Intel’s next-generation data center product on Intel 3
technology, is also well underway.
The joint venture will manufacture wafers for sale to Intel on a
cost-plus-margin basis. Under the agreement, Intel is required to
finish the build-out of Fab 34 and purchase wafers from the joint
venture for itself and external customers, with minimum volume
commitments for its wafer demand following the substantial
completion of the facility.
For financial reporting purposes, Intel expects to consolidate
results of the joint venture through net income and account for
income attributable to the 49% ownership interest in net income
(loss) attributable to non-controlling interests. Intel expects net
income attributable to such non-controlling interest to be limited
in the first two years but to increase thereafter as the factory
ramps to full capacity.
The transaction is expected to close in the second quarter of
2024.
Intel’s Smart Capital Approach
Smart Capital provides financial guardrails and acceleration to
return Intel to process technology and product leadership. In
addition to SCIP, other elements of Smart Capital include: 1)
government incentives to provide a level playing field for building
a geographically diverse and resilient semiconductor supply chain;
2) build-out of shell space, which gives the company the
flexibility to determine how and when to bring additional capacity
online; 3) customer participation in internal capacity build-outs
as Intel executes its foundry strategy; and 4) strategic and
opportunistic use of external foundries.
Intel’s SCIP program has supported the company’s period of
accelerated manufacturing investment that commenced in early 2021.
With the signing of this second SCIP agreement, the company is not
contemplating further SCIP transactions in the near term.
Intel’s Manufacturing Footprint in Ireland
Intel celebrated the opening of Fab 34 in Ireland in September
2023, marking the first use of extreme ultraviolet lithography
(EUV) in high-volume manufacturing in Europe. Fab 34 is designed to
support high-volume production of Intel 3 and Intel 4 technologies.
In addition to Fab 34, Intel maintains a second manufacturing
facility in Leixlip, Fab 24, which has been a key location for
production of Intel’s 14-nanometer silicon microprocessors, while
also preparing to support Intel Foundry customers. The transaction
with Apollo only pertains to Fab 34.
Advisors
Goldman Sachs & Co. acted as lead financial advisor to Intel
and Skadden, Arps, Slate, Meagher & Flom LLP and Eversheds
Sutherland served as legal counsel to Intel. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is serving as legal counsel to the
Apollo-managed funds and affiliates, while Latham & Watkins LLP
is serving as legal counsel to Apollo co-investors.
Forward-Looking Statements
This release contains forward-looking statements regarding the
Intel’s expectations regarding the agreement with Apollo, including
with respect to the impact on its business and strategy and
financial condition, its ability to unlock and redeploy a portion
of its investment in Fab 34, the anticipated closing and
implications of the transaction, the future impact to its results
of operations, its expectations as to the cost of capital and
treatment of Apollo’s investment in the joint venture as
equity-like from a rating perspective, and the build-out and
ramping of Fab 34. Such statements involve many risks and
uncertainties that could cause the actual results or outcomes to
differ materially from those expressed or implied, including those
associated with:
- the high level of competition and rapid technological change in
Intel’s industry;
- the significant long-term and inherently risky investments
Intel is making in R&D and manufacturing facilities that may
not realize a favorable return;
- the complexities and uncertainties in developing and
implementing new semiconductor products and manufacturing process
technologies;
- Intel’s ability to time and scale its capital investments
appropriately and successfully secure favorable alternative
financing arrangements and government grants;
- implementing new business strategies and investing in new
businesses and technologies;
- changes in demand for Intel’s products;
- macroeconomic conditions and geopolitical tensions and
conflicts, including geopolitical and trade tensions between the US
and China, the impacts of Russia's war on Ukraine, tensions and
conflict affecting Israel and the Middle East, and rising tensions
between mainland China and Taiwan;
- the evolving market for products with AI capabilities;
- Intel’s complex global supply chain, including from
disruptions, delays, trade tensions and conflicts, or
shortages;
- product defects, errata and other product issues, particularly
as Intel develops next-generation products and implements
next-generation manufacturing process technologies;
- potential security vulnerabilities in Intel’s products;
- increasing and evolving cybersecurity threats and privacy
risks;
- IP risks including related litigation and regulatory
proceedings;
- the need to attract, retain, and motivate key talent;
- strategic transactions and investments;
- sales-related risks, including customer concentration and the
use of distributors and other third parties;
- Intel’s significantly reduced return of capital in recent
years;
- Intel’s debt obligations and ability to access sources of
capital;
- complex and evolving laws and regulations across many
jurisdictions;
- fluctuations in currency exchange rates;
- changes in Intel’s effective tax rate;
- catastrophic events;
- environmental, health, safety, and product regulations;
- Intel’s initiatives and new legal requirements with respect to
corporate responsibility matters; and
- other risks and uncertainties described in Intel’s 2023 Form
10-K and other filings with the SEC.
Given these risks and uncertainties, readers are cautioned not
to place undue reliance on such forward-looking statements. Readers
are urged to carefully review and consider the various disclosures
made in the documents Intel files from time to time with the SEC
that disclose risks and uncertainties that may affect its
business.
Unless specifically indicated otherwise, the forward-looking
statements in this report are based on Intel management's
expectations as of the date of this report, unless an earlier date
is specified, including expectations based on third-party
information and projections that management believes to be
reputable. Intel does not undertake, and expressly disclaims any
duty, to update such statements, whether as a result of new
information, new developments, or otherwise, except to the extent
that disclosure may be required by law.
About Intel
Intel (Nasdaq: INTC) is an industry leader, creating
world-changing technology that enables global progress and enriches
lives. Inspired by Moore’s Law, we continuously work to advance the
design and manufacturing of semiconductors to help address our
customers’ greatest challenges. By embedding intelligence in the
cloud, network, edge and every kind of computing device, we unleash
the potential of data to transform business and society for the
better. To learn more about Intel’s innovations, go to
newsroom.intel.com and intel.com.
About Apollo
Apollo is a high-growth, global alternative asset manager. In
our asset management business, we seek to provide our clients
excess return at every point along the risk-reward spectrum from
investment grade to private equity with a focus on three investing
strategies: yield, hybrid, and equity. For more than three decades,
our investing expertise across our fully integrated platform has
served the financial return needs of our clients and provided
businesses with innovative capital solutions for growth. Through
Athene, our retirement services business, we specialize in helping
clients achieve financial security by providing a suite of
retirement savings products and acting as a solutions provider to
institutions. Our patient, creative, and knowledgeable approach to
investing aligns our clients, businesses we invest in, our
employees, and the communities we impact, to expand opportunity and
achieve positive outcomes. As of March 31, 2024, Apollo had
approximately $671 billion of assets under management. To learn
more, please visit www.apollo.com.
© Intel Corporation. Intel, the Intel logo and other Intel marks
are trademarks of Intel Corporation or its subsidiaries. Other
names and brands may be claimed as the property of others.
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version on businesswire.com: https://www.businesswire.com/news/home/20240604172872/en/
Kylie Altman Intel Investor Relations 1-916-356-0320
kylie.altman@intel.com
Sophie Won Intel Media Relations 1-408-653-0475
sophie.won@intel.com
Noah Gunn Apollo, Global Head of Investor Relations
1-212-822-0540 IR@apollo.com
Joanna Rose Apollo, Global Head of Corporate Communications
1-212-822-0491 communications@apollo.com
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