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Intel Buys 15% Stake in ASML to Speed up Fab Machines Development

Intel just committed to spending $4.1 billion, to grab a 15% stake in ASML Holding NV, a company that specializes in equipment for semiconductor foundries. The company particularly values this purchase as it is in the process of re-equipping its fabs to let them dole out bigger semiconductor wafers, improving yields and cutting manufacturing costs.

In its latest press release, Intel announced acquisition of a 15 percent stake in ASML Holdings NV, a move that could accelerate its fabs acquiring 450 mm wafer manufacturing capabilities. Wafers with 450 mm diameter reduce manufacturing costs, and work to increase yields. 

Intel initially committed an investment of approximately $1 billion to ASML's research and development programs that are developing new technologies for 450 mm wafer manufacturing (bigger wafers), and extreme ultraviolet or EUV silicon lithography (smoother transition to finer silicon fabrication processes). The investment could accelerate the two R&D programs by as much as 2 years.

Intel also announced purchase 10 percent shares of ASML issued before the transation, for roughly $2.1 billion. The company committed to purchasing another 5 percent (at $1.05 billion). Together, the share purchase and R&D investments total up to $4.1 billion.

  Phase 1 450-mm Lithography Phase 2 EUV Lithography Total
R&D Investment in ASML €553 million (~$680 million) over 5 years Incremental €276 million (~$340 million) over 5 years €829 million (~$1.0 billion) over 5 years
EquityInvestment in ASML €1.7 billion (~$2.1 billion), 10 percent of pre-transaction shares Incremental €838 million (~$1.0 billion), 5 percent of post-transaction shares €2.5 billion (~$3.1 billion) 15 percent of post-transaction shares
Total €2.2 billion (~$2.7 billion) €1.1 billion (~$1.4 billion) €3.3 billion (~$4.1 billion)
Status Pending regulatory approval Pending regulatory and ASML shareholder approvals  

The two companies will close the transactions after due regulatory approvals, and shareholder vote. Intel's senior vice president and COO, Brian Krzanich, said "Productivity improvements driven by enhanced wafer manufacturing technologies, especially larger silicon wafers and enhanced lithography technologies with EUV are direct enablers of Moore's Law, which delivers significant economic benefits to consumers," adding "The transition from one wafer size to the next has historically delivered a 30 to 40 percent reduction in die cost and we expect the shift from today's standard 300-mm wafers to larger 450-mm wafers to offer similar benefits. The faster we do this, the sooner we can gain the benefit of productivity improvements, which creates tremendous value for customers and shareholders."

What does this mean to consumers? Intel is making an all-out effort to ensure it doesn't hit a fab process roadblock to keep its tick-tock CPU development cycle going. Technologies like 450 mm wafers are important to maintain acceptable yields, as complexities of chips rise exponentially, every few generations. The advancements in EUV lithography technology, on the other hand, will enable chips with finer transistors and circuits.

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