Intel Inks $30 Billion Financing Partnership With Brookfield To Fund Manufacturing Expansion

Intel is taking a large step in expanding its manufacturing at a time when many in the market are counting the semiconductor company out. 

The former chip leader signed a $30 billion funding partnership with Brookfield Asset Management that will help finance its “massive factory expansion ambitions,” a Tuesday morning report by the Wall Street Journal said.

The deal could be the “first of many”, according to the report, as Chief Executive Pat Gelsinger looks to make a manufacturing push over competitors based in Taiwan and South Korea.

Intel will fund 51% of the cost of building new chip-making facilities in Arizona and will have a controlling stake in the financing entities that will own the factories. 

“Brookfield will own the remainder of the equity and the companies will split the revenue that comes out of the factories,” Intel Chief Financial Officer David Zinsner told WSJ. 

Similar deals are often seen in energy and telecommunications, and are only now moving into semiconductors because of the industry’s growing need for expansion. 

Brookfield has more than $750 billion under management. 

Despite short term hurdles, Geslinger has said that he expects annual sales to top $1 trillion by the end of the decade. Intel is one of many semi companies expanding by building new factories in Arizona.

As the WSJ notes: 

As chips become more advanced and their circuitry shrinks to just thousandths of the width of a human hair, manufacturing them has become more expensive. A large, advanced chip plant today can cost more than a state-of-the-art aircraft carrier or a nuclear-power plant, according to a Boston Consulting Group analysis.

Zinsner said the company needed new capital to keep up with ambitious expansion plans, stating: “We have gotten behind, and that requires a fairly aggressive investment cycle over the next few years, which is not a place Intel typically finds itself.”

Intel stock, which we pointed out yesterday now yields over 4%, has been hammered lower as investor optimism for the company’s expansion plans has been muted. 

INTC yielding 4.3%

— zerohedge (@zerohedge) August 22, 2022