Intel's Latest SCIP With Apollo. Yikes!

Why make the deal with Fab 34 in Ireland instead of the Ohio fab under construction?

On June 4 2024, Intel announced its second so-called Semiconductor Co-Investment Program (SCIP), this time with Apollo, a self-styled high-growth, global alternative asset manager. The facility in question on this occasion is Fab 34, located in Ireland.

SANTA CLARA, Calif. & NEW YORK--(BUSINESS WIRE)-- Intel Corporation (Nasdaq: INTC) and Apollo (NYSE: APO) today announced a definitive agreement under which Apollo-managed funds and affiliates will lead an investment of $11 billion to acquire from Intel a 49% equity interest in a joint venture entity related to Intel’s Fab 34

Intel’s first foray down the SCIP route was announced in August 2022. This deal involved a similar-looking JV with Brookfield to jointly invest in two new leading-edge chip factories to be built in Arizona.

Accompanying that first announcement was an invitation to a webinar where CFO David Zinsner provided a (somewhat) deeper dive for investors. This time around, there’s no webinar. It would appear that SCIPs have become a new normal at Intel.

We took quite a negative view on Intel’s first SCIP back when it was announced. Our views haven’t changed in the interim. This latest SCIP has an additional twist which further sours out outlook for Intel. Why? The answer lies in the choice of Fab 34 as the target of the Apollo deal. After all, why not the Ohio factory, currently under construction. Or the planned fab in Germany. Let’s dig in….