Intel partners with Apollo in $11bn JV for semiconductor production

Intel Corporation (Nasdaq: INTC) and Apollo (NYSE: APO) have recently announced a definitive agreement in which Apollo-managed funds and affiliates will invest $11 billion to acquire a 49% equity stake in a new joint venture (JV) entity related to Intel’s Fab 34. This collaboration marks Intel’s second engagement in the Semiconductor Co-Investment Program (SCIP), enhancing the company’s Smart Capital strategy aimed at accelerating its leadership in semiconductor manufacturing.

Intel’s SCIP is integral to its Smart Capital approach, which seeks to foster financial flexibility to propel the company’s strategic objectives. This includes significant investments in global manufacturing operations without compromising the strength of its balance sheets. Located in Leixlip, Ireland, Fab 34 is Intel’s leading-edge high-volume manufacturing (HVM) facility, utilizing the latest Intel 3 and Intel 4 process technologies. Intel has invested $18.4 billion in Fab 34 to date, and this transaction will allow Intel to redeploy a substantial portion of this investment into other crucial areas of its business.

Fab 34 is pivotal for Intel’s expansion plans, marked by its recent inauguration in September 2023 as the first site for high-volume use of extreme ultraviolet lithography (EUV) in Europe. The joint venture secures the production capacity necessary to meet Intel’s long-term product demands and the needs of Intel Foundry customers.

Intel CFO, David Zinsner, commented on the deal’s strategic benefits, “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.”

Apollo Partner Jamshid Ehsani emphasized the transaction’s strategic importance, noting that it stands among the largest of its kind in private investments, enhancing global supply chain resiliency and advancing next-generation technologies, including AI.

The joint venture agreement is set to close in the second quarter of 2024. For Intel, the financial integration will reflect the joint venture’s results through its net income, considering the 49% equity interest held by non-controlling interests. The initial impact on net income attributable to these interests is expected to be limited but will increase as Fab 34 reaches full capacity.

This strategic joint venture is a significant move for Intel, reinforcing its manufacturing prowess while diversifying its investment portfolio. By partnering with Apollo, Intel not only ensures the expansion of its operational capacities but also secures a financial model that supports sustained growth and technological innovation.