Intel will retain majority ownership in the new chip fabs in Arizona, but share revenue with Brookfield Asset Management.
Brookfield Asset Management, the Canadian investment firm with $750 billion in assets, recently agreed to help build Intel’s new factories in Arizona, a rare arrangement that could gain popularity.
Intel will fund 51% of the cost of building new chip fabs and will retain a majority stake in the facility’s proprietary financing vehicle. Brookfield holds the remaining equity, while the two companies split the revenue.
“The deal is unusual in the chip industry,” says Amit Thakur, managing partner at Amax Capital. “But [it] has parallels in other sectors. The aspect of revenue sharing is more common in mining, according to Thakur, and sometimes in hospitality and aviation.
Growing capital needs in the chip industry have spurred change. Building a factory for the tiny and complex next-generation chips would cost more than $20 billion.
“I wouldn’t be surprised to see more and more unorthodox deals like this,” says Julian Klymochko, CEO of Accelerate. Asset management firms have billions and “need places to allocate that capital.” Institutional investors like Brookfield traditionally allocate large amounts of capital to real estate and telecommunications assets, he adds.
For Intel, the deal may help lift the company out of a two-year slump. In July 2020, Intel announced that annual revenue would likely be $75 billion. The actual amount hovered just below $77.9 billion, an 8.2% increase from 2019. However, the company’s shares continued to decline, even as the rest of the stock market lagged. is rectified that month.
A six-month delay in the company’s launch of the next-generation chips was enough to scare off investors. Since then, CEO Pat Gelsinger, who replaced former chief Bob Swan, has focused on transforming Intel from laggard to leader, despite companies from Taiwan and South Korea taking stakes. market in the United States.
Lawmakers are also trying to help. President Joseph Biden has signed legislation that provides more than $50 billion for domestic chip manufacturing. Intel lobbied for the bill.