Intel, Brookfield Enter $30B Semiconductor Partnership

As the United States races to grow its domestic semiconductor manufacturing base—and to end to its reliance on chips made in Asia—Intel has formed an unprecedented partnership with Brookfield Asset Management to fund a $30B expansion of Intel’s US chip fab facilities.

The semiconductor giant will maintain operational control of the partnership by contributing 51% of the funding, while Toronto-based Brookfield will contribute 49%, according to a statement issued jointly by the companies this week.

The joint statement said Intel and Brookfield’s Infrastructure division will evenly share the revenue generated by new or expanded chip fabs funded by the venture. The deal is expected to close by the end of the year.

Brookfield, with a total of more than $750B in AUM, is bringing its capital muscle to the partnership as a strategic extension of its thriving Infrastructure portfolio, which accounts for $138B of AUM.

Brookfield Infrastructure has established itself as one of the world’s largest infrastructure investors, owning and operating assets across utilities, transport, midstream and data sectors.

“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, Brookfield Infrastructure CEO, in a statement.

Last year, Intel announced it would add two new chip fabs to its semiconductor manufacturing complex in Chandler, AZ, a project the company estimated would cost $20B. Intel announced it would build a new semiconductor manufacturing hub, including several chip fabs, in Lorain, Ohio—a project industry analysts say will cost up to $100B.

Due to rising costs, the cost of the Arizona expansion is now expected to hit $30B, said David Zinsner, Intel’s CFO. Rising costs have forced Intel to seek a new source of capital instead of traditional funding vehicles like bank loans or bond sales, the CFO said.

“We’ve gotten behind, [and] that requires a fairly aggressive investment cycle over the next few years, which is not a place Intel typically finds itself,” Zinsner told the Wall Street Journal,

Semiconductor manufacturers have gone on a roller-coaster ride in the past two years, first struggling to cope with a global supply shortage caused by supply-chain disruptions during the pandemic, and then watching demand slump in recent months as inflation and rate hikes take their toll.

Intel CEO Pat Gelsinger has projected that annual semiconductor sales will top $1 trillion by the end of this decade—even if demand takes a dip through an economic slowdown. Gelsinger is committed to regaining Intel’s global leadership of semiconductor manufacturing by overtaking competitors in Taiwan, South Korea and China in chip fabrication.

That may be a tall order, because the largest semiconductor producer in South Korea already has made a public commitment to match Intel’s expansion and raise it—and do it all in one US State.

Last month, as Congress prepared to adopt $52B in new federal subsidies for US semiconductor manufacturing and research—a bill President Biden recently signed into law—Samsung unveiled plans to build 11 new chip fabs in Texas, a potential investment of $191B.

The South Korea-based electronics conglomerate, the world leader in semiconductor manufacturing, announced it is planning to add two chip fabs to its semiconductor complex in Austin and nine more chip plants to its complex in Taylor, TX, where Samsung currently is preparing to build an advanced semiconductor facility for $17B.

In a Chapter 313 application to the state of Texas—the first step in a long-term planning process that would result in the state issuing tax breaks for the projects—Samsung said the first of the 11 new plants would be operational by 2034.