1. Buyout firm Apollo Global Management (APO.N), will acquire a 49% equity interest in a joint venture related to Intel's (INTC.O), new manufacturing facility in Ireland for $11 billion, the companies said on Tuesday.
2. Apollo will acquire the stake in the Fab 34 joint venture in Leixlip, Ireland, the U.S. chipmaker's first high-volume location for its Intel 4 manufacturing process using extreme ultraviolet lithography machines.
3. The deal, expected to close in the second quarter, would allow Intel to redeploy parts of its investment in the project to other parts of its business, the company said.
4. Intel has invested $18.4 billion in the facility to date.
5. The company announced plans in 2022 to build chip factories in Ireland and France as it seeks to benefit from easier European Commission funding rules and subsidies as the bloc looks to cut its dependence on U.S. and Asian supply.
6. The joint venture has the right to make chips at the facility, while Intel retains full ownership and operational control of the factory itself.
7. Intel forecast second-quarter revenue and profit below market estimates in April as it faces weak demand for its traditional data center and personal computing chips, amid a surging market for AI components.
INTEL ACCELERATED IRELAND EUV FAB RAMP-UP AS METEOR LAKE CHIPS WERE IN SHORT SUPPLY
1. Alongside Intel’s weak Q2 2024 earnings report and the announcement of $10 billion in spending cuts and layoffs for 2025, the company is also disclosing some new information about their chip deliveries over the first half of the year.
2. A brief report, posted on X by analyst Patrick Moorhead and citing a conversation with Intel CEO Pat Gelsinger, revealed that Intel encountered a major production bottleneck on Meteor Lake earlier this year. The issue was significant enough to drive intel to take the extraordinary and costly step of accelerating their Ireland fab ramp-up in order to improve chip capacity.
3. Between Moorhead's report that OEMs have been receiving fewer Meteor Lake chips than they could use, and Intel's announcement that they accelerated the Ireland fab ramp-up, this is the first significant disclosure that Meteor Lake chips were, at least at some point, in unexpectedly short supply. Which in turn required Intel to take unexpected and extraordinary steps in order to improve chip production, at the cost of lower short-term profit margins and higher COGS.
4. The first of Intel's high-volume manufacturing (HVM) fabs to be equipped for the Intel 4 and Intel 3 processes, Fab 34 in Ireland is a critical element to Intel's cutting-edge product plans over the next couple years. Intel was not initially planning on relying so much on Fab 34 this soon – instead using their Oregon development fabs to do more of their Intel 4 & Intel 3 fabrication – but the company opted to ramp up at a faster pace. The benefit to Intel is that they get more fab capacity sooner, but it means they're incurring around $1 billion in costs now of what would have otherwise been spread out over further quarters during a more gradual ramp-up.
5. The net result was that, while Intel took a margin hit, it also allowed them to supply more Meteor Lake chips than they otherwise would have, even beating their own previous projections for Q2 shipments. Overall, Intel reported in their Q2 earnings that they’ve shipped 15 million “AI PC” chips since Meteor Lake’s launch, though the company doesn't break down how many of those were in Q2 versus Q1 and Q4'23. Still, according to Moorhead, this was fewer chips than OEMs would have liked to have, and they would have taken more chips if they were available.
6. COGS and Ireland ramp-ups aside, Moorhead also posits that some of Intel's capacity boost came from running “hot lots” of Meteor Lake – high priority wafer batches that get moved to the front of the line in order to be processed as soon as possible (or as reasonably close as is practical). Hot lots are typically used to get highly-demanded chips produced quickly, getting them through a fab sooner than the normal process would take. As a business tool, hot lots are a fact of life of chip production, but they’re undesirable because in most cases they cause disruptions to other wafers that are waiting their turn to be processed.
7. If true, running hot lots of Meteor Lake would be a significant development given the potential disruptions. At the same time, however, the situation with Meteor Lake is somewhat particular, as the Intel 4 process used for Meteor Lake’s compute tile (the only active tile made at Intel) is not offered to external foundry customers, or even used by other Intel CPUs (Xeon 6s all use Intel 3). So hot lots of Meteor Lake would have few other wafers to even jump ahead of for EUV tooling (Intel would certainly not put them ahead of high-margin Xeon products), while it's unclear how this would cascade down to any tools shared with Intel 7.
8. In any case, Intel at this point is looking to turn around their troubled fortunes in the second half of this year. The company’s next-gen client SoC for mobile, Lunar Lake, is set to launch on September 3rd. And notably, both of its active tiles are being built by TSMC. So Lunar Lake would be spared from any Intel logic fab bottlenecks, though it still has to go through Intel’s facilities for assembly using their Foveros technology. And there remains the thorny issue of higher production costs altogether, since Intel is paying for what's effectively the fully outsourced production of a Core CPU.
Source:
https://www.reuters.com/markets/deals/intel-apollo-agree-jv-related-intels-manufacturing-facility-ireland-2024-06-04/
https://www.anandtech.com/show/21497/intel-accelerated-ireland-fab-ramp-as-meteor-lake-chips-were-in-short-supply
