Intel Corp (NASDAQ: INTC) and Canada’s Brookfield Asset Management (NYSE: BAM) on Tuesday agreed to jointly fund up to $30 billion for the U.S. company’s chip factories in Arizona. The move fuels Intel’s ambition to bring more chip production onshore without weighing on its balance sheet, reports Reuters.
Brookfield’s infrastructure affiliate will invest up to $15 billion for a 49 percent stake in the expansion project. Intel will retain majority ownership and operating control of the two chip factories meant to make advanced chips in Chandler, AZ.
The investment is an expansion of an agreement signed by Intel and Brookfield in February to explore finance options to help fund new Intel manufacturing sites.
The two companies didn’t disclose specific terms, though parties expect the deal to close by the end of this year. David Zinsner, Intel’s finance chief, told analysts the interest rate was between 4.4 percent and 8.5 percent, which is more expensive than debt financing but cheaper than equity financing, according to Reuters.
Zinsner expects this could be the first of many similar financing structures the semiconductor industry explores. For private capital providers like Brookfield, foundries represent a cash-flow generating investment opportunity resembling private equity investments in infrastructure, such as data centers and fiber, signaling investors’ long-term confidence in semiconductor demand.
The deal comes after President Joe Biden this month signed the CHIPS and Science Act into law, which included $52.7 billion in subsidies for U.S. semiconductor production and research, Inside Towers reported. Zinsner said the transaction “builds on the momentum from the recent passage of the CHIPS Act in the U.S.”
By Leslie Stimson, Inside Towers Washington Bureau Chief
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