Intel has entered into a $30 billion financing agreement with Brookfield Asset Management (BAM). This is the first semiconductor co-investment program that will help fund the company’s chip manufacturing expansion plans.
Intel expansion, a $30 billion deal
The chip world is in turmoil, due to the chronic shortage of raw materials, which is causing major problems in the delivery of the high-value microchips that rule the world of technology and computing.
In 2020, a series of transactions with a total value of approximately $106 billiondirected by Nvidiawhich in September 2020 made an offer to acquire ARM for around $40 billion from Softbank.
In February this year, the deal would later blow up due to issues with some details of the valuation of ARM, which makes chips for smartphones.
This agreement, which exploded at the last moment, strengthened competition from Nvidia, which currently remains the world’s largest producer of electronic chips.
Intel, which is Nvidia’s biggest competitor, announced in recent days a partnership with Brookfield Asset Management to finance the purchase of a company in the sector, with an outlay of around $30 billion. The same American company is on the verge, according to the Reuters news agency, of concluding an additional agreement of 5 billion dollars with build an assembly business in Italy.
In fact, again according to Reuters, Intel’s investment would amount to approximately $88 billion over the next ten years and would see the construction of new factories all over Europe. In Italy, the plant should be built in Piedmont or Veneto.
The $30 billion deal, on the other hand, would involve building a new factory in Arizona. The ambitious plan would be the work of the company’s new CEO, Pat Gelsinger, which came on board in January to turn around the declining chipmaker. The deal also includes Intel’s purchase of GlobalFoundries, the world’s third-largest independent semiconductor foundry, headquartered in Sunnyvale, California.
Key statements on the current agreement
Intel CEO said:
“At this point, we wouldn’t say M&A is essential, but we’re not ruling it out either. In our view, industry consolidation is very likely. The intense R&D, the need to upgrade to modern, state-of-the-art nodes, the massive capital investments required, we just think smaller players simply won’t be able to keep up, and foundries without cutting-edge capabilities will be left behind. And we are continually looking for ways to accelerate our plans with IFS. If an acquisition can help, we certainly won’t rule it out.
It would be one of the biggest deals in the microchip world since Nvidia’s failed deal a few months ago.
Patrick MorheadFounder and Principal Analyst at Moor Insight & Strategies Moorhead, a consultancy specializing in the microchip industry, explained:
“GlobalFoundries has specialized technologies and processes for 5G RF, IoT and automotive. Intel with GlobalFoundries would become what I call a “full stack vendor” that could offer everything to a customer. This is perfectly aligned with IDM 2.0 (Intel’s chip manufacturing strategy) and would allow Intel to achieve this years before it could without GlobalFoundries.
The deal is also rumored to serve Intel to expand its growing new business in cryptocurrency mining chips, in which the US microchip company is reportedly investing heavily, after announcing in July the upcoming launch of the new ASICS for mining.