Intel Spends Big on New Wafer Technology

Intel Corp. (NASDAQ: INTC) announced after markets closed last night that it would buy a 10% stake in Dutch chip-equipment maker ASML Holding NV (NASDAQ: ASML) for $2.1 billion. Intel will also cough up another $1 billion to fund R&D costs at ASML, and could purchase another 5% of ASML for yet another $1 billion in the future, subject to ASML shareholder approval.

The announcement came at about the same time that Advanced Micro Devices Inc. (NYSE: AMD) was informing investors that its previous estimate for a sequential quarterly revenue increase of 3% would instead turn into a revenue decrease of around -11%.

Intel’s investment in ASML will “help accelerate deployment of new technologies for 450-millimeter [about 18-inch] wafers and extreme ultra-violet (EUV) lithography by as much as two years.” Current wafer equipment and technology yields 300-millimeter (about 12-inch) wafers. Equipment used to make wafers is hugely expensive and often takes many years to develop. The attraction of the larger wafer size is increased productivity:

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.

ASML had said that it would sell as much as a 25% stake in the company to Intel and other chip makers under this equity and R&D scheme. The company also noted that Intel will be limited to just this 15% stake regardless of whether or not any other chip makers decide to take a stake.

Shares of ASML are up nearly 10% in the pre-market this morning, at $53.24, a new 52-week high if the price holds. The current 52-week range is $30.65-$52.87. Intel shares are down about -1% at $25.94 in a 52-week range of $19.16-$29.27.

Paul Ausick