Intel got a $5.7 billion cash infusion on Wednesday night under a deal brokered by US President Donald Trump, securing the government a 10% stake in the struggling chipmaker, Finance Chief David Zinsner told an investor conference on Thursday.
The stake in Intel announced by the US government last week is an incentive for Intel to retain control of its contract manufacturing business, or foundry, Zinsner said.
Additional Warrant
As part of the deal, the government negotiated an additional 5% warrant, should Intel cease to own more than 51% of its foundry operation.
“I don’t think there’s a high likelihood that we would take our stake below 50%,” Zinsner said. “So ultimately, I would expect (the warrant) to expire worthless.”
Separate Management Board
Intel has taken steps to separate its contract chip manufacturing arm, or foundry, from its design business. The company has previously said it could take outside investment in the foundry unit, and it has created a separate management board to govern it.
Should Intel take outside investors for the foundry business, Zinsner said the company was leaning toward taking a strategic investor versus a financial one. But Intel is “years away from that”.
In July, Intel disclosed that the future of its foundry business depended on securing a big customer for its next-generation manufacturing process known as 14A. Failing that, it could get out of the foundry business altogether.
On Thursday, Zinsner downplayed the potential risk to its foundry. “The lawyers are always looking for areas where we should be elaborating in terms of our risks,” he said.
Intel Shares Down
Intel is focused on landing a big customer next year but is committed to maintaining “financial discipline” while developing the next-generation manufacturing technology and technique, Zinsner said. The investment in 14A for only Intel’s internal use is too great to provide an “appropriate” return on investment for shareholders, he said.
Intel shares were down 0.6% at $24.69 on Thursday afternoon.
(With inputs from Reuters)
