Intel and Brookfield Investing Up to $30 Billion in Chip Plants in Arizona
Intel and Brookfield Asset Management will jointly fund up to $30 billion for the leading US chip maker
Intel Corp. and Canada’s Brookfield Asset Management on Tuesday agreed to provide joint funding of up to $30 billion to a leading US chip maker in Arizona, fueling Intel’s efforts to expand its portfolio without affecting its balance sheet. Ambition to bring more chip production home.
The Brookfield Infrastructure subsidiary will invest up to $15 billion for a 49 percent stake in the expansion, while it will retain majority ownership and operating control of the chip makers in Chandler, Arizona.
This investment is an extension of an agreement that Intel and Brookfield signed in February to explore financing options to help fund new manufacturing sites.
The companies did not disclose specific terms. Intel treasurer David Zinsner told analysts that the interest rate, which ranges between 4.4% and 8.5%, is more expensive than debt financing but cheaper than equity financing.
For private capital providers like Brookfield, foundries represent an investment opportunity to generate cash flow, similar to private equity investments in infrastructure such as data centers and fiber optics, indicating long-term investor confidence in semiconductor demand.
With this transaction, Intel can maintain debt sustainability for other priorities while maintaining operational control by providing financing commitments for a multi-year project.
Zinsner expects this to be the first of many similar financing structures that have been explored by the semiconductor industry.
The deal also comes after US President Joe Biden signed the CHIPS and Science Act into law this month, which includes $52.7 billion in support for US semiconductor production and research.
Zinsner said the arrangement between the two companies “builds on the momentum of passing the recent Chips Act in the US.”
After Pat Gelsinger took over as Intel in early 2021, the company announced billions of dollars in investments in Europe and the United States.
Their goal is to ramp up the production of chips after the industry suffered a supply crunch for more than two years that derailed the production of cars for computers.
Last month, Intel lowered its annual forecast due to lower demand for personal computers.
The deal with Brookfield is expected to close by the end of 2022. Lazard Freer advised Intel on the deal.
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