Intel in $30bn partnership to fund US-based chip plant

Chip giant Intel has partnered with Canada’s Brookfield Asset Management to fund the development of a $30bn semiconductor plant in Arizona.

The move follows the US government’s CHIPS and Science Act, which was passed in July in an effort to make the country more competitive with China’s science and technology efforts and to address shortage of semiconductors in the supply chain.

The act includes $39bn in tax benefits and other incentives to encourage American companies to build new chip manufacturing plants domestically.

Semiconductor manufacturing is a hugely capital-intensive industry and Intel said that the program was integral to its ‘Smart Capital’ approach which aims to provide innovative ways to fund growth while creating further financial flexibility.

“This landmark arrangement is an important step forward for Intel’s Smart Capital approach and builds on the momentum from the recent passage of the Chips Act in the US,” said Intel CFO David Zinsner.

Under the terms of the agreement, the companies will jointly inject $30bn into Intel’s manufacturing expansion at its Arizona campus with Intel funding 51% and Brookfield 49% of the total project cost.

“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,” Zinsner added.

The partnership is expected to boost Intel’s free cash flow by $15bn over the next decade.

The transaction with Brookfield – an asset manager with experience in developing infrastructure assets such as transmission lines, data centres and wireless cell towers – is expected to close by the end of 2022, subject to customary closing conditions.