Intel strikes $30 billion private equity partnership to fund Arizona plant expansion

Chip giant Intel has announced a partnership with Brookfield Infrastructure Partners, which will see the pair jointly invest $30 billion into expanding the firm’s Arizona plant.

Expected to close by the end of the year, the deal is a first-of-its-kind Semiconductor Co-Investment Program (SCIP) and represents a new funding model in the capital-intensive semiconductor industry, Intel said.

Under the terms of the agreement Brookfield will fund 49% of the $30 billion cost of expanding the company’s Ocotillo campus in Chandler, Arizona.

With a 51% stake, Intel will retain majority ownership and operating control of the two proposed new chip factories, which will support long-term demand and provide capacity for Intel Foundry Services (IFS) customers.

Announcing the deal, Intel CFO David Zinsner said the arrangement builds on the momentum from the recent passage of the CHIPS Act in the U.S.

“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,” he said.

“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.”

SCIP forms a key component of Intel’s Smart Capital approach, a framework designed to adjust quickly to opportunities in the market while also managing capital spending. Essentially, the structure allows Intel to access strategically-aligned capital to increase its flexibility and scale its manufacturing build-outs.

It’s the latest step in the company’s efforts to become less reliant on overseas manufacturers such as Taiwan’s TSMC and South Korea’s Samsung, following an extended period of supply chain disruption.

“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 added.

The chipmaker said its partnership with Brookfield will enhance its balance sheet and allow it to tap into a new pool of capital below its cost of equity, while also protecting its cash and debt capacity for future investments.

The move is expected to boost cash flow by $15 billion over the next several years, while also enabling Intel to replicate the co-investment model with other partners in the future.

“By combining Brookfield's access to large-scale capital with Intel’s industry leadership, we are furthering the advancement of leading semiconductor production capabilities,” said Sam Pollock, CEO of Brookfield Infrastructure.

“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.”