Intel to Repurchase 49% Equity Interest in Ireland Fab Joint Venture

[Artificer60]

I have a pretty good model for 18A wafer cost today and what it will be when fully loaded in Fab 52.

Curious, does your model show 18A is cost competitive when F52 is fully ramped? And what is your yield assumption when 18A is mature?

I'm assuming this is not based on a final product since that involves chips from multiple processes/vendors.

 

[hist78]

Well you are only thinking it from one point of view it is possible don't forget there is profit sharing as well for the fab Intel already paid a decent amount of fine for Ireland already if they failed to meet another milestone they had to pay the fine on top of sharing the profit and Intel might have factored that in when making the purchase.

Isn’t what you described just one of the reasons that Intel is being forced to buy back the 49% stake in the joint venture at such a high price and poor timing when Intel needs more cash? Especially since it effectively wipes out almost all of the cash investments made by the U.S. government, Nvidia, and SoftBank.

This $14.2 billion cash outflow exceeds the total net profit Intel has earned over the past five years. By comparison, Intel’s 2025 CapEx is $14.65 billion, only slightly higher than the $14.2 billion payout to Apollo.

This JV buyback will allow Intel to manage its Ireland fab with greater flexibility. But, the financial strain on Intel is enormous. Intel must be under significant pressure to execute such a large buyback, one that does not increase fab capacity at all.

"Are we really sure Intel initiated this “joint venture” buyback? Or was Intel forced to buy back Apollo’s 49% stake because the JV contract entitled Apollo to a highly profitable exit once certain clauses were met, or not met?"

Post in thread 'Intel to Repurchase 49% Equity Interest in Ireland Fab Joint Venture'

Friday at 1:21 PM

Financial engineers, appointed in 2009 at the end of the financial crisis, being saved by taxpayers; time to get out after 17 years "guiding" INTEL:
https://www.intc.com/news-events/pr...hair-frank-d-yeary-to-retire-following-annual

This is good as the terms of the agreement were very punishing if milestones were not met (they were not met).

Intel now does not have regulations over how to use it.

Using other peoples money to fund IFS growth was a core of Pats plan.... Since intel is not growing, It now is being fixed but it will...

• hist78

 

[siliconbruh999]

Isn’t what you described just one of the reasons that Intel is being forced to buy back the 49% stake in the joint venture at such a high price and poor timing when Intel needs more cash? Especially since it effectively wipes out almost all of the cash investments made by the U.S. government, Nvidia, and SoftBank.

Can't say about poor timing though cause the fab is decent bit old now it might have out of being costly phase

 

[Artificer60]

Isn’t what you described just one of the reasons that Intel is being forced to buy back the 49% stake in the joint venture at such a high price and poor timing when Intel needs more cash? Especially since it effectively wipes out almost all of the cash investments made by the U.S. government, Nvidia, and SoftBank.

This $14.2 billion cash outflow exceeds the total net profit Intel has earned over the past five years. By comparison, Intel’s 2025 CapEx is $14.65 billion, only slightly higher than the $14.2 billion payout to Apollo.

This JV buyback will allow Intel to manage its Ireland fab with greater flexibility. But, the financial strain on Intel is enormous. Intel must be under significant pressure to execute such a large buyback, one that does not increase fab capacity at all.

"Are we really sure Intel initiated this “joint venture” buyback? Or was Intel forced to buy back Apollo’s 49% stake because the JV contract entitled Apollo to a highly profitable exit once certain clauses were met, or not met?"

Post in thread 'Intel to Repurchase 49% Equity Interest in Ireland Fab Joint Venture'

Friday at 1:21 PM

Financial engineers, appointed in 2009 at the end of the financial crisis, being saved by taxpayers; time to get out after 17 years "guiding" INTEL:
https://www.intc.com/news-events/pr...hair-frank-d-yeary-to-retire-following-annual

This is good as the terms of the agreement were very punishing if milestones were not met (they were not met).

Intel now does not have regulations over how to use it.

Using other peoples money to fund IFS growth was a core of Pats plan.... Since intel is not growing, It now is being fixed but it will...

• hist78

Another possibility is that Lip-Bu Tan is a smart guy, has better insight into the business than anyone on this forum, and made the right call. Don't know if that is the case or not, but if we're being fair, that needs to be put out there.

 

[Brady]

No way around looking at this as a short term “smart capital” decision being extraordinarily expensive in the medium/long term. Good for Intel going forward but just sad to see billions of Intel (and US taxpayer’s…) money going straight to a PE firm as a literal form of rent extraction.

Was anything of value actually provided to Intel in this deal? Did they actually achieve something with that fab that they wouldn’t have been able to otherwise? Sounds like… no.

 

[siliconbruh999]

No way around looking at this as a short term “smart capital” decision being extraordinarily expensive in the medium/long term. Good for Intel going forward but just sad to see billions of Intel (and US taxpayer’s…) money going straight to a PE firm as a literal form of rent extraction.
Was anything of value actually provided to Intel in this deal? Did they actually achieve something with that fab that they wouldn’t have been able to otherwise? Sounds like… no.

Maybe saving $Billions over the course of multiple years?

 

[hist78]

Another possibility is that Lip-Bu Tan is a smart guy, has better insight into the business than anyone on this forum, and made the right call. Don't know if that is the case or not, but if we're being fair, that needs to be put out there.

Certainly, any Intel CEO, current or past, knows Intel inside and out far more than bloggers on this forum. But that doesn’t mean their decisions were always smart. We all know that a series of poor decisions made by Intel leadership has contributed to the company’s struggles today.

In the case of this Apollo JV buyback, the current Intel CEO, Li-Bu Tan, likely has no choice but to honor the contractual agreement made by his predecessor, Pat Gelsinger. Mr. Tan understands exactly how much financial stress a $14.2 billion cash outflow will place on Intel, but he has no better option than to pay Apollo under contractual obligation.

One irony is that no other semiconductor company in the world uses this type of private‑equity‑funded fab project structure. Are they all not as “smart” as Intel? I remember Intel CFO David Zinsner saying, after the Brookfield–Intel JV announcement, that the cost of this type of deal falls somewhere between equity financing and a loan. But I also recall TSMC CFO Wendell Huang commenting that such private‑equity financing is simply too expensive. Now I understand why it’s too expensive. What David Zinsner said was untrue.

Did Pat Gelsinger or David Zinsner mislead the public (in my most polite wording)?

"The transaction represents Intel’s second Semiconductor Co-Investment Program (SCIP) arrangement. SCIP is an element of Intel’s Smart Capital strategy, a funding approach designed to create financial flexibility to accelerate the company’s strategy, including investing in its global manufacturing operations, while maintaining a strong balance sheet."

Source: https://newsroom.intel.com/corporate/co-invest-program-news-2024