Intel and Apollo form partnership for joint venture at Intel’s Fab 34 in Ireland

Intel and Apollo have announced an $11 billion investment deal, in which Apollo will acquire a 49% equity interest in a joint venture entity related to Intel's Fab 34, allowing Intel to unlock and redeploy a portion of its investment while maintaining control and operational control of the facility.

Intel's Semiconductor Co-Investment Program (SCIP) provides financial flexibility for the company's global manufacturing operations while maintaining a strong balance sheet.
The joint venture will manufacture wafers for Intel on a cost-plus-margin basis, allowing Intel to unlock and redeploy a portion of its investment in Fab 34 while continuing to build out the facility.
The transaction aligns with Intel's transformation strategy, which includes investing billions of dollars in regaining process leadership and expanding wafer fabrication and advanced packaging capacity worldwide.

Intel Corporation and Apollo have announced a $11 billion investment deal, in which Apollo-managed funds and affiliates will acquire a 49% equity interest in a joint venture entity related to Intel’s Fab 34. This agreement is part of Intel’s Semiconductor Co-Investment Program (SCIP), which aims to create financial flexibility for the company’s global manufacturing operations while maintaining a strong balance sheet.

Fab 34, located in Leixlip, Ireland, is Intel’s leading-edge high-volume manufacturing facility for wafers using Intel 4 and Intel 3 process technologies. With this transaction, Intel can unlock and redeploy a portion of its investment in Fab 34 while continuing to build out the facility. This move aligns with Intel’s transformation strategy, which includes investing billions of dollars in regaining process leadership and expanding wafer fabrication and advanced packaging capacity worldwide.

Under the agreement, the joint venture will have the 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 maintain a controlling interest of 51% in the joint venture while retaining full ownership and operational control of Fab 34 and its assets. The transaction aims to enhance Intel’s balance sheet with capital at a cost below its cost of equity.

David Zinsner, Intel’s CFO, stated that this agreement with Apollo provides additional flexibility for executing their strategy of creating a resilient and sustainable semiconductor supply chain. He also mentioned that their investments in leading-edge capacity in the US and Europe are crucial to meet the growing demand for silicon, as the global semiconductor market is expected to double over the next five years.

Jamshid Ehsani, an Apollo partner, expressed their pleasure in entering into this joint venture with Intel. He emphasized the significance of this capital transaction as one of the largest private investments of its kind, showcasing Apollo’s ability to provide creative and scaled capital solutions to corporations and infrastructure. Ehsani also highlighted their role as a trusted financing partner in building the New Economy, including investments in AI technology, sustainable power generation, data centers, foundries, and semiconductor capabilities.

Construction of Fab 34 is mostly complete, with high-volume manufacturing of Intel Core Ultra processors on Intel 4 technology already underway since September 2023. The joint venture will manufacture wafers for Intel on a cost-plus-margin basis. Intel is required to complete the build-out of Fab 34 and purchase wafers from the joint venture for itself and external customers.

Intel expects to consolidate the 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. While net income attributable to non-controlling interest is expected to be limited in the first two years, it is projected to increase as the factory ramps up to full capacity.

The transaction is set to close in the second quarter of 2024.

Intel’s Smart Capital Approach, which includes SCIP, is designed to provide financial guardrails and acceleration to return Intel to process technology and product leadership. SCIP has supported Intel’s period of accelerated manufacturing investment since early 2021. With this second SCIP agreement, Intel is not currently planning further SCIP transactions in the near term.

In addition to SCIP, other elements of Intel’s Smart Capital approach include government incentives, build-out of shell space, customer participation in capacity build-outs, and strategic use of external foundries.

Fab 34 in Ireland, which opened in September 2023, is Intel’s first high-volume manufacturing facility in Europe to use extreme ultraviolet lithography (EUV). It is designed for high-volume production of Intel 3 and Intel 4 technologies. Intel also operates another manufacturing facility in Leixlip, Fab 24, which has been instrumental in producing Intel’s 14-nanometer silicon microprocessors and is preparing to support Intel Foundry customers. However, the transaction with Apollo only pertains to Fab 34.

Goldman Sachs & Co. acted as the lead financial advisor to Intel, while Skadden, Arps, Slate, Meagher & Flom LLP and Eversheds Sutherland served as legal counsel. Paul, Weiss, Rifkind, Wharton & Garrison LLP is providing legal counsel to the Apollo-managed funds and affiliates, and Latham & Watkins LLP is serving as legal counsel to Apollo co-investors.

Intel’s forward-looking statements regarding the agreement with Apollo highlight the expected impact on its business and strategy, financial condition, and the build-out and ramping of Fab 34. However, these statements come with risks and uncertainties associated with competition, investments, product development, geopolitical tensions, cybersecurity threats, and other factors. Intel urges readers to carefully review the various disclosures made in its SEC filings that discuss these risks and uncertainties.

Overall, this investment deal between Intel and Apollo represents a significant move for both companies in strengthening Intel’s manufacturing capabilities while providing Apollo with an opportunity to contribute to the semiconductor supply chain and leverage private capital for building the New Economy.

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Background Information

About Intel:

Intel Corporation, a global technology leader, is for its semiconductor innovations that power computing and communication devices worldwide. As a pioneer in microprocessor technology, Intel has left an indelible mark on the evolution of computing with its processors that drive everything from PCs to data centers and beyond. With a history of advancements, Intel's relentless pursuit of innovation continues to shape the digital landscape, offering solutions that empower businesses and individuals to achieve new levels of productivity and connectivity.

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Technology Explained

EUV: Extreme Ultraviolet Lithography (EUV or EUVL) is an advanced semiconductor manufacturing technique that employs extremely short wavelengths of light in the extreme ultraviolet spectrum to create intricate patterns on silicon wafers. Utilizing a wavelength around 13.5 nanometers, significantly shorter than traditional lithography methods, EUVL enables the production of smaller and more densely packed integrated circuits, enhancing the performance and efficiency of modern microprocessors and memory chips.

Latest Articles about EUV

Foundry: A foundry is a dedicated manufacturing facility focused on producing semiconductor components like integrated circuits (ICs) for external clients. These foundries are pivotal in the semiconductor industry, providing diverse manufacturing processes and technologies to create chips based on designs from fabless semiconductor firms or other customers. This setup empowers companies to concentrate on innovative design without needing substantial investments in manufacturing infrastructure. Some well-known foundries include TSMC (Taiwan Semiconductor Manufacturing Company), Samsung Foundry, GlobalFoundries, and UMC (United Microelectronics Corporation).