Apollo and Intel discuss financing an $11bn chip factory in Ireland

US semiconductor giant Intel entered exclusive discussions with Apollo Global for the financing of an $11bn chipmaking facility in Ireland. Large corporations are increasingly turning to private capital groups to fund expansion projects instead of banks.

Intel is in discussions to raise funding for an aggressive buildout in semiconductor fabrication plants. This will allow it to shift supply chains away from Asia and towards Western Europe and North America, and to modernise its chipmaking facilities in order to keep up with rapid advances in artificial intelligence.

Three sources familiar with the matter said that Santa Clara’s chipmaking pioneer was in talks with KKR and Stonepeak about financing its new semiconductor facility in Ireland, before exclusive discussions with Apollo.

Apollo and Intel declined comment. The Wall Street Journal reported earlier on the exclusive talks between Apollo and Intel.

Intel has a multi-year plan for transforming its business. Chief executive Pat Gelsinger is trying to regain the lead from rivals TSMC, Samsung, in terms of designing cutting edge chips while also overhauling Intel’s manufacturing operation to produce chips for competitors.

The US announced in March that it would lend Intel almost $20bn under the 2022 Chips Act in order to increase its ability to manufacture chips in new plants in Arizona New Mexico Ohio and Oregon.

Gelsinger has positioned Intel as the national champion who can shift chip production from Asia into the US and Europe over the next few years amid tensions between China. The company is also building a new government-subsidised plant in Germany.

Intel’s manufacturing division suffered operating losses of $7bn, a steeper decline than in the previous year. Intel’s lacklustre outlook for sales has affected its share price. It predicts its manufacturing business to only break even by 2027.

Intel has already formed partnerships with private capital groups in order to finance the construction and expansion of new semiconductor manufacturing plants. Intel sold up to 49 percent of a chip-making plant in Arizona it was building to Canada’s Brookfield Infrastructure Partners in 2022 for $15bn to finance the $30bn venture.

Apollo has become a major lender of investment-grade loans, which are more complex than the corporate bonds that are sold on the debt markets.

Apollo has announced that it will be expanding its capabilities to provide similar arrangements.

Apollo announced to its shareholders this month that it expects to generate over $200 billion in debt each year in the coming years. This will be fueled by lending to companies with investment-grade ratings such as Intel. Apollo told its shareholders that it will concentrate on lending to new infrastructure, such as digital communication networks, data centers, renewable energy facilities, and semiconductors.

Apollo’s lending business is supported by its insurance company, which has assets worth over $500bn, and can generally own these debts until maturity.

The Irish government, which is heavily dependent on corporate tax revenues generated by global tech and pharmaceutical companies, did not comment immediately on the talks. Intel has invested over $34bn in transforming a former stud-farm in Leixlip in Co Kildare into a chip manufacturing plant. The company also expanded its operations in Ireland.