Intel and Apollo Start Discussions to Finance a $11 Billion Chip Plant in Ireland

The $11 billion chip manufacturing facility that US semiconductor giant Intel plans to build in Ireland is being funded exclusively by Apollo Global, a move that reflects the trend of large corporations financing their expansion initiatives through private capital groups rather than banks.

As it modernizes its chipmaking production facilities to keep up with the rapid advancements in artificial intelligence technology, Intel has been in talks to raise financing for an aggressive buildout of semiconductor fabrication plants. The company is shifting its supply chains from Asia to Western Europe and North America.

According to three people briefed on the matter, the Santa Clara-based chipmaking pioneer had been in talks to finance its new semiconductor plant in Ireland with two other private capital groups, KKR and Stonepeak, before going into exclusive talks with Apollo.

Amid a multiyear plan to revamp the company’s operations, Intel CEO Pat Gelsinger is aiming to reclaim the top spot in chip design, having lost it to rivals TSMC and Samsung, while also revamping the manufacturing division to produce chips for rival companies.

The US government declared in March that, as part of the 2022 Chips Act, it would lend Intel nearly $20 billion in direct funding and loans to increase its capacity to produce chips at new plants in Arizona, New Mexico, Ohio, and Oregon.

Amid tensions with China, Gelsinger has positioned Intel as a national champion capable of significantly moving chip production from Asia to the US and Europe in the upcoming years. Additionally, the business is constructing a new, government-subsidized plant in Germany.

Operating losses for Intel’s manufacturing division reached $7 billion in 2023, a greater decline than the previous year. The stock price of Intel has been negatively impacted by its poor sales forecast, which indicates that its manufacturing division won’t break even until 2027.

Large private capital firms have already partnered with Intel to help finance the establishment of new semiconductor fabrication facilities. To raise $30 billion for the project, Intel sold up to a 49 percent share in a chip plant it was developing in Arizona in 2022 to Canada’s Brookfield Infrastructure Partners for $15 billion.

Apollo has become a significant lender for more complex investment-grade rated loans than corporate bonds offered to the larger debt markets.

Apollo arranged sizable investment-grade loans to Vonovia, a German real estate developer, and Air France/KLM last year. The company has indicated that it is fast increasing its ability to make such agreements.

This month, Apollo informed its shareholders that it anticipated generating more than $200 billion in debt per year in the upcoming years, primarily from loans to investment-grade rated firms like Intel. Apollo has informed investors that the development of new infrastructure, including semiconductors, data centers, digital communications networks, and renewable energy facilities, will be the main focus of its lending.

Apollo’s insurance business, which has over $500 billion in assets and can typically hold these debts until maturity, supports its lending.

The talks elicited no immediate response from Ireland’s government, which is largely dependent on corporation tax income from multinational tech and pharmaceutical firms. Since 1989, Intel has spent more than $34 billion to expand its operations in Ireland and convert a former stud farm in Leixlip, County Kildare, into a chip fabrication plant.