Intel signs agreement with Brookfield to
jointly invest up to $30 billion in leading-edge chip factories in
Arizona.
Intel to host investor webcast at 5:45 a.m.
PDT today.
Intel Corporation today announced a first-of-its-kind
Semiconductor Co-Investment Program (SCIP) that introduces a new
funding model to the capital-intensive semiconductor industry. As
part of its program, Intel has signed a definitive agreement with
the infrastructure affiliate of Brookfield Asset Management, one of
the largest global alternative asset managers, which will provide
Intel with a new, expanded pool of capital for manufacturing
build-outs.
SCIP is a key element of Intel’s Smart Capital approach, which
aims to provide innovative ways to fund growth while creating
further financial flexibility to accelerate the company’s IDM 2.0
strategy. Intel’s agreement with Brookfield follows the two
companies’ memorandum of understanding announced in February 2022.
Under the terms of the agreement, the companies will jointly invest
up to $30 billion in Intel’s previously announced manufacturing
expansion at its Ocotillo campus in Chandler, Arizona, with Intel
funding 51% and Brookfield funding 49% of the total project cost.
Intel will retain majority ownership and operating control of the
two new leading-edge chip factories in Chandler, which will support
long-term demand for Intel’s products and provide capacity for
Intel Foundry Services (IFS) customers. The transaction with
Brookfield is expected to close by the end of 2022, subject to
customary closing conditions.
“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 U.S.,” said David Zinsner,
Intel CFO. “Semiconductor manufacturing is among the most
capital-intensive industries in the world, and Intel’s bold IDM 2.0
strategy demands a unique funding approach. 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.”
Sam Pollock, CEO of Brookfield Infrastructure, said, “By
combining Brookfield's access to large-scale capital with Intel’s
industry leadership, we are furthering the advancement of leading
semiconductor production capabilities. Leveraging our partnership
experience in other industries, we are pleased to come together
with Intel in this important investment that will form part of the
long-term digital backbone of the global economy.”
Benefits of the Transaction
Intel’s partnership with Brookfield is expected to enhance the
company’s strong balance sheet by allowing Intel to tap into a new
pool of capital below its cost of equity while protecting its cash
and debt capacity for future investments and continuing to fund a
healthy and growing dividend. Over the next several years, the
structure is expected to provide a $15 billion cumulative benefit
to Intel’s adjusted free cash flow and is expected to be accretive
to Intel’s earnings per share during the construction and ramp
phase. SCIP provides Intel the ability to replicate the
co-investment model with other partners for other build-outs
globally.
Intel’s Smart Capital Approach
SCIP is an important component of Intel’s overall Smart Capital
approach, which is designed to allow the company to adjust quickly
to opportunities in the market, while managing its margin structure
and capital spending. Through SCIP, Intel is accessing
strategically aligned capital to increase its flexibility and help
efficiently accelerate and scale its manufacturing build-outs. This
type of co-investment also shows how private capital is unlocked
and becomes a force multiplier for government incentives for
semiconductor manufacturing expansion.
In addition to SCIP, the other key elements of Smart Capital
include:
- Smart capacity investments: Intel is aggressively
building out relatively low-cost shell space, which gives the
company flexibility in how and when it brings additional capacity
online based on milestone triggers such as product readiness,
market conditions and customer commitments. In 2021, approximately
35% of Intel’s capital expenditures was spent on
infrastructure.
- Government incentives: Intel is continuing to work with
governments in the U.S. and Europe to advance incentives for
domestic manufacturing capacity for leading-edge semiconductors.
Considerable progress has been made over recent months, as
President Biden signed into law the CHIPS and Science Act of 2022
that includes funding for $52 billion in incentives for the U.S.
semiconductor industry; the U.S. Congress is making strides with
the FABS Act, which will establish a semiconductor investment tax
credit in the U.S.; and the European Chips Act has added 15 billion
euros to an existing 30 billion euros in public investments to
build new infrastructure, among other advancements.
- Customer commitments: IFS is working closely with
potential customers, and several have indicated willingness to make
advance payments to secure capacity. This provides Intel with the
advantage of committed volume, de-risking investments while
providing capacity corridors for its foundry customers.
- External foundries: The company intends to continue its
use of external foundries where their unique capabilities support
Intel’s leadership products.
“Intel’s Smart Capital actions provide Intel with greater
flexibility, reduce overall gross capital needs and act as a
tailwind to adjusted free cash flow and gross margin. We expect
that SCIP, combined with the other pillars of our Smart Capital
approach, will allow us to significantly accelerate our
transformation and help deliver the more globally balanced supply
chain the world needs,” Zinsner concluded.
Webcast
Intel will hold a public webcast at 5:45 a.m. PDT today to
discuss the transaction. Please visit
https://edge.media-server.com/mmc/p/o68agf99 to register for the
webcast. The accompanying presentation and webcast replay will also
be available on Intel's Investor Relations website at intc.com.
Advisors
Lazard Frères & Co. LLC served as financial advisor to Intel
and Skadden, Arps, Slate, Meagher & Flom LLP served as legal
counsel to Intel. Kirkland & Ellis LLP served as legal counsel
to Brookfield.
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.
Forward-Looking Statements
This document contains certain forward-looking statements
related to the proposed transaction between Intel and Brookfield
and certain of their affiliates, including statements regarding the
benefits and the timing of the transaction, and to our SCIP and
Smart Capital program. Words such as “anticipate,” “believe,”
“could,” “estimate,” “expect,” “forecast,” “intend,” “likely,”
“may,” “plan,” “potential,” “project,” “predict,” “seek,” “should,”
“target,” “would” and “will” and variations of such words and
similar expressions are intended to identify such forward-looking
statements. Such statements are based on management’s expectations
as of the date they were first made and involve risks and
uncertainties, many of which are beyond our control, that could
cause our actual results to differ materially from those expressed
or implied in our forward-looking statements. Such risks and
uncertainties include, among others, uncertainties as to the timing
of the consummation of the transaction and the potential failure to
satisfy the conditions to the consummation of the transaction; the
availability of government incentives and other legislation,
including the CHIPS and Science Act of 2022; business interruptions
related to our supply chain; delays, disruptions, challenges or
increased costs in Intel’s construction or manufacturing expansion
at its Ocotillo campus in Chandler, Arizona, whether due to events
within or outside of Intel’s control; expected benefits, including
financial benefits, of the transaction or the Smart Capital
strategy may not be realized; litigation related to the transaction
or otherwise; unanticipated costs may be incurred or undisclosed
liabilities assumed; risks related to diverting management’s
attention from Intel’s ongoing business operations; potential
adverse reactions or changes to business relationships resulting
from the announcement or completion of the transaction; and other
risks detailed in Intel’s filings with the Securities and Exchange
Commission (the “SEC”), including those discussed in Intel’s most
recent Annual Report on Form 10-K and in any subsequent periodic
reports on Form 10-Q and Form 8-K, each of which is on file with or
furnished to the SEC and available at the SEC’s website at
www.sec.gov. SEC filings for Intel are also available on Intel’s
Investor Relations website at www.intc.com. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date they were first made. Unless
otherwise required by applicable law, Intel and Brookfield
undertake no obligation and do not intend to update these
forward-looking statements, whether as a result of new information,
future events or otherwise.
Explanation of Non-GAAP Measure
This document contains reference to the non-GAAP financial
measure of adjusted free cash flow. We believe this non-GAAP
financial measure is helpful in understanding our capital
requirements and sources of liquidity by providing an additional
means to evaluate the cash flow trends of our business.
Adjusted free cash flow is operating cash flow adjusted for 1)
additions to property, plant and equipment, net of proceeds from
capital grants and partner contributions, 2) payments on finance
leases, and 3) proceeds from the McAfee equity sale. This non-GAAP
financial measure should not be considered a substitute for, or
superior to, financial measures calculated in accordance with US
GAAP.
We are unable to provide a full reconciliation of adjusted free
cash flow to the corresponding GAAP measure without unreasonable
efforts, as the amount and timing of related adjustments on a
long-term basis are subject to considerable uncertainty, depend on
various factors, and could be material to our results computed in
accordance with GAAP. We believe such a reconciliation would also
imply a degree of precision that is inappropriate for these
forward-looking measures.
© 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220823005333/en/
Tim Blankenship Investor Relations 1-480-554-9007
timothy.blankenship@intel.com
Sophie Won Media Relations 1-408-653-0475
sophie.won@intel.com
Intel (NASDAQ:INTC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Intel (NASDAQ:INTC)
Historical Stock Chart
From Jul 2023 to Jul 2024