Apollo eyes $5 billion investment in Intel, Bloomberg News reports

[Daniel Nenni]

FILE PHOTO: Intel logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/File Photo© Thomson Reuters

(Reuters) - U.S.-based asset management company Apollo Global Management has offered to make an investment of as much as $5 billion in Intel, Bloomberg News reported on Sunday.

Apollo has indicated in recent days it would be willing to make an equity-like investment of billions of dollars in Intel, the report said citing a person familiar with the matter.

Intel executives have been weighing Apollo’s proposal, Bloomberg reported, adding that talks regarding the deal have not been finalized.

The size of the potential investment could change and discussions could fall through, the report said.

Apollo and Intel did not immediately respond to a Reuters' request for comment.

Apollo eyes $5 billion investment in Intel, Bloomberg News reports

Apollo has indicated in recent days it would be willing to make an equity-like investment of billions of dollars in Intel, the report said, citing a person familiar with the matter. The news comes at a moment of weakness for Intel, which was once the most valuable chipmaker in the world, but...

finance.yahoo.com

 

[Fabian.]

Does $5 billion make a difference?

 

[hist78]

FILE PHOTO: Intel logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/File Photo© Thomson Reuters

(Reuters) - U.S.-based asset management company Apollo Global Management has offered to make an investment of as much as $5 billion in Intel, Bloomberg News reported on Sunday.

Apollo has indicated in recent days it would be willing to make an equity-like investment of billions of dollars in Intel, the report said citing a person familiar with the matter.

Intel executives have been weighing Apollo’s proposal, Bloomberg reported, adding that talks regarding the deal have not been finalized.

The size of the potential investment could change and discussions could fall through, the report said.

Apollo and Intel did not immediately respond to a Reuters' request for comment.

Apollo eyes $5 billion investment in Intel, Bloomberg News reports

Apollo has indicated in recent days it would be willing to make an equity-like investment of billions of dollars in Intel, the report said, citing a person familiar with the matter. The news comes at a moment of weakness for Intel, which was once the most valuable chipmaker in the world, but...

finance.yahoo.com

I'm wondering what kinds of concessions Intel will give to Apollo in exchange for the $5 billion "investment" or whatever it's called.

Intel has already "mortgaged" all its fabs capable of producing Intel 3, Intel 4, Intel 18A, and Intel 14A nodes, except the Oregon fabs.

1. 1. The Brookfield/Intel deal involves Arizona's Fabs 52 and 62, focused on Intel 18A and Intel 14A nodes.
2. 2 . The Apollo/Intel deal involves Ireland's Fab 34, focused on Intel 3 and Intel 4 nodes.
3. 
   In these agreements, Intel guaranteed Apollo and Brookfield certain investment returns, revenue, profit, volume, and fab utilization for the fabs they are involved with.
4. 
   
5. Intel will need to pay penalties if the Apollo- or Brookfield-related fabs underperform, as required in the contracts. This means Intel's design/product division will lose the flexibility to choose external foundry services, as well as the flexibility to select which internal Intel fab to use and which technical path to follow. At the same time Intel Foundry will lose the flexibility to allocate or arrange the capital, engineers, equipment and other resources among all the "Intel" fabs.
6. 
   
7. Does this make sense? Is it too risky?

 

[kevin01]

I'm wondering what kinds of concessions Intel will give to Apollo in exchange for the $5 billion "investment" or whatever it's called.

Intel has already "mortgaged" all its fabs capable of producing Intel 3, Intel 4, Intel 18A, and Intel 14A nodes, except the Oregon fabs.

1. 1. The Brookfield/Intel deal involves Arizona's Fabs 52 and 62, focused on Intel 18A and Intel 14A nodes.
2. 2 . The Apollo/Intel deal involves Ireland's Fab 34, focused on Intel 3 and Intel 4 nodes.
3. 
   In these agreements, Intel guaranteed Apollo and Brookfield certain investment returns, revenue, profit, volume, and fab utilization for the fabs they are involved with.
4. 
   
5. Intel will need to pay penalties if the Apollo- or Brookfield-related fabs underperform, as required in the contracts. This means Intel's design/product division will lose the flexibility to choose external foundry services, as well as the flexibility to select which internal Intel fab to use and which technical path to follow. At the same time Intel Foundry will lose the flexibility to allocate or arrange the capital, engineers, equipment and other resources among all the "Intel" fabs.
6. 
   
7. Does this make sense? Is it too risky?

They may just want to buy 5% of INTC through a targeted 2nd offering at a certain price. Buying 5% in the open market may move INTC price quite a bit.

Note that Apollo has already invested in Ireland fab, it is not clear if Intel share with them periodically about that fab's yield, utilization, etc.

 

[tedc]

I'm wondering what kinds of concessions Intel will give to Apollo in exchange for the $5 billion "investment" or whatever it's called.

Intel has already "mortgaged" all its fabs capable of producing Intel 3, Intel 4, Intel 18A, and Intel 14A nodes, except the Oregon fabs.

1. 1. The Brookfield/Intel deal involves Arizona's Fabs 52 and 62, focused on Intel 18A and Intel 14A nodes.
2. 2 . The Apollo/Intel deal involves Ireland's Fab 34, focused on Intel 3 and Intel 4 nodes.
3. 
   In these agreements, Intel guaranteed Apollo and Brookfield certain investment returns, revenue, profit, volume, and fab utilization for the fabs they are involved with.
4. 
   
5. Intel will need to pay penalties if the Apollo- or Brookfield-related fabs underperform, as required in the contracts. This means Intel's design/product division will lose the flexibility to choose external foundry services, as well as the flexibility to select which internal Intel fab to use and which technical path to follow. At the same time Intel Foundry will lose the flexibility to allocate or arrange the capital, engineers, equipment and other resources among all the "Intel" fabs.
6. 
   
7. Does this make sense? Is it too risky?

When you frame it that way, it certainly makes it more difficult for Intel to convince customers they're anything but a secondary priority (after Intel, Apollo/Brookfield, etc.) or that their interests are aligned (e.g. pressure to overbuy, pressure to use specific nodes, etc.). The focus on shorter-term returns that Apollo/Brookfield have is exactly the sort of thing that got Intel into trouble in the first place.

It also weakens Intel's negotiating power if margins are hamstrung by these agreements (i.e. they can't eat short-term margins in favor of longer-term, growth partnerships).

 

[hist78]

They may just want to buy 5% of INTC through a targeted 2nd offering at a certain price. Buying 5% in the open market may move INTC price quite a bit.

Note that Apollo has already invested in Ireland fab, it is not clear if Intel share with them periodically about that fab's yield, utilization, etc.

"Note that Apollo has already invested in Ireland fab, it is not clear if Intel share with them periodically about that fab's yield, utilization, etc."

Intel must provide those information to Apollo because Apollo is the 49% owner of Ireland Fab 34 manufacturing right (formerly 100% owned by Intel).

 

[prime007]

1. Does this make sense? Is it too risky?

I'm no financial expert but Intel's behavior under Pat really seems to reek of desperation and he seems to be digging a hole that's getting deeper & deeper.

Maybe Qualcomm will ultimately save Intel but please don't tell me that this was ever part of Pat's plan.

But maybe I'm wrong to think Intel 18A/14A won't save Intel and be a major success given the good news for Intel that's come out the last week.

 

[Barnsley]

More financial chicanery.

Brilliant

 

[soAsian]

I'm no financial expert but Intel's behavior under Pat really seems to reek of desperation and he seems to be digging a hole that's getting deeper & deeper.

Maybe Qualcomm will ultimately save Intel but please don't tell me that this was ever part of Pat's plan.

But maybe I'm wrong to think Intel 18A/14A won't save Intel and be a major success given the good news for Intel that's come out the last week.

I share your sentiment. Despite Pat's tech background, Pat has so far failed to impress and seems like a typical CEO

 

[XYang2023]

He failed the duty of protecting shareholders' value. CEOs should work to maximise shareholders' value. It is like achieving near 0 mark for 100 full mark exam.

 

[johnson.z.wu]

I share your sentiment. Despite Pat's tech background, Pat has so far failed to impress and seems like a typical CEO

Frankly, Intel needs a strong CEO like Steve Jobs did for Apple. A typical CEO cannot save Intel at all.
Pat have faith in US manufacturing, while the world doesn't.

 

[hist78]

I'm no financial expert but Intel's behavior under Pat really seems to reek of desperation and he seems to be digging a hole that's getting deeper & deeper.

Maybe Qualcomm will ultimately save Intel but please don't tell me that this was ever part of Pat's plan.

But maybe I'm wrong to think Intel 18A/14A won't save Intel and be a major success given the good news for Intel that's come out the last week.

Assume Intel Foundry pricing is similar to or less than TSMC's in order to be competitive. If Intel's Ireland Fab 34 is making $1 billion in profit by year-end, about $500 million (or more) will go to Apollo, and the rest of the profit will go into Intel's coffers.

This seems like a strange situation to me. If Fab 34 has the same profit margin as a TSMC’s fab, Intel (the parent company) is actually getting about 50% less profit than TSMC.

Even worse, if Fab 34 is losing money, Intel still needs to pay Apollo a certain undisclosed amount as required by the Apollo-Intel contract.

Unless Apollo's 49% share in the Apollo-Intel joint venture at Ireland Fab 34 does not entitle Apollo to 49% of the profit?

In my opinion, the foundry business is already very challenging, but this type of joint venture will make it even more difficult for Intel.

 

[kevin01]

Frankly, Intel needs a strong CEO like Steve Jobs did for Apple. A typical CEO cannot save Intel at all.
Pat have faith in US manufacturing, while the world doesn't

Intel shareholders may need a bit of patience here. Even for Steve Jobs, it took 4 years to bring out the first turnaround product, iPod. For AMD's Lisa Su, it took 5 years to bring out Zen 1, and AMD's stock price dropped to $2.xx during that time, while it was $8 when Lisa became CEO.

The jury is still out for Intel and Pat Gelsinger. However, it seems premature to write off Pat when Intel 18A is going into production in 2025 and its products finally get built on EUV processes (Intel 3 and N3) and become competitive. If anything, for the market share loss, the uncompetitive Intel 7 process should be blamed, but Pat really could not accelerate product roadmap that much when he took over.

I will judge $intc and Pat Gelsinger in 2025.

 

[osnium]

Frankly, Intel needs a strong CEO like Steve Jobs did for Apple. A typical CEO cannot save Intel at all.
Pat have faith in US manufacturing, while the world doesn't.

Do you think Intel should give up on manufacturing?

 

[johnson.z.wu]

Do you think Intel should give up on manufacturing?

They should spin off not give up manufacturing. Let US capital flow in the fab. It is not just Intel's problem.
If US don't need chip manufacture any more, let the fab die.
Obviously, Intel can't afford the fab alone.

 

[MKWVentures]

Intel shareholders may need a bit of patience here. Even for Steve Jobs, it took 4 years to bring out the first turnaround product, iPod. For AMD's Lisa Su, it took 5 years to bring out Zen 1, and AMD's stock price dropped to $2.xx during that time, while it was $8 when Lisa became CEO.

The jury is still out for Intel and Pat Gelsinger. However, it seems premature to write off Pat when Intel 18A is going into production in 2025 and its products finally get built on EUV processes (Intel 3 and N3) and become competitive. If anything, for the market share loss, the uncompetitive Intel 7 process should be blamed, but Pat really could not accelerate product roadmap that much when he took over.

I will judge $intc and Pat Gelsinger in 2025.

2025 might not be looking better that 2024. Expect more PR announcements, cheerleading and no new revenue. 2027 MAYBE gets better. Unfortunately the financial decisions made in last 3 years start to become an anchor in 2027 at the same time.

 

[Daniel Nenni]

Do you think Intel should give up on manufacturing?

No, but Intel needs to pivot like Globalfoundries did. GF spent billions trying to compete head-to-head with TSMC and lost. Samsung does the same (billions lost) and Intel is losing against TSMC too. If you can't win a game change the rules so you can.

The next TSMC event is this week in Silicon Valley. My guess is that it will be a very big victory lap.

 

[tedc]

Intel shareholders may need a bit of patience here. Even for Steve Jobs, it took 4 years to bring out the first turnaround product, iPod. For AMD's Lisa Su, it took 5 years to bring out Zen 1, and AMD's stock price dropped to $2.xx during that time, while it was $8 when Lisa became CEO.

Lisa Su became AMD CEO on October 8, 2014 (closing share price was $3.28 and dropped from there). Zen 1 was released in March 2017, so ~2.5 years.

Gelsinger's been CEO since February 2021, putting us at the ~3.5 year mark.

2025 might not be looking better that 2024. Expect more PR announcements, cheerleading and no new revenue. 2027 MAYBE gets better. Unfortunately the financial decisions made in last 3 years start to become an anchor in 2027 at the same time.

Just trying to keep track: the Apollo/Brookfield co-investments, extending equipment depreciation windows from 5 to 8 years. What else is concerning?

 

[kevin01]

Lisa Su became AMD CEO on October 8, 2014 (closing share price was $3.28 and dropped from there). Zen 1 was released in March 2017, so ~2.5 years.

Gelsinger's been CEO since February 2021, putting us at the ~3.5 year mark.

I made a mistake by counting her time from joining AMD in Jan 2012. But Zen 1 design was indeed started in 2012 after rehiring Jim Keller, https://en.wikipedia.org/wiki/Zen_(first_generation). Was Jim Keller hire her decision or not?

Nothing would magically turn around in 2.5 years in the Semi world, where it takes a few years from design, securing capacity, to production.

Just trying to keep track: the Apollo/Brookfield co-investments, extending equipment depreciation windows from 5 to 8 years. What else is concerning?

 

[hist78]

2025 might not be looking better that 2024. Expect more PR announcements, cheerleading and no new revenue. 2027 MAYBE gets better. Unfortunately the financial decisions made in last 3 years start to become an anchor in 2027 at the same time.

Is 2026 going to be a good year?