Intel parts with 20% slice of semiconductor biz crucial to chip production future

Intel is selling a 20 percent stake in a key technology company it owns to investors Bain Capital, claiming the move will encourage more cross-industry collaboration once the chip giant loosens its grip on the venture.

The Santa Clara chipmaker said it has agreed to sell a minority stake in IMS Nanofabrication to Bain Capital Special Situations in a deal that puts a value on IMS of approximately $4.3 billion.

Vienna-based IMS is described as an industry leader in multi-beam mask writing for advanced semiconductor process nodes, meaning that its technology is used to create the photolithography masks used in the production of the world's most cutting-edge semiconductors.

Intel initially invested in IMS in 2009, before acquiring the business in 2015. Since then, IMS has delivered a significant return on investment, Intel said, while growing production capacity through three product generations.

According to Intel, extreme ultraviolet lithography (EUV) processes are becoming increasingly important for the latest semiconductor production nodes, and multi-beam mask writing tools are critical components in all this.

So why would Intel sell off 20 percent of a such an important company?

The transaction with Bain Capital could help position IMS to capture more of the market by accelerating innovation and enabling deeper cross-industry collaboration, according to Intel.

Also, one could make the argument that selling off a chunk of IMS will bring a fresh business approach from Bain, and help convince other partners and customers of IMS that it is no longer totally under the thumb of the giant chipmaker.

"Bain Capital's investment and partnership will provide IMS with increased independence and bring strategic perspective to help accelerate the next phase of lithography technology innovation, ultimately benefiting the ecosystem as a whole," Intel senior VP of Corporate Development Matt Poirier said in a statement.

Gaurav Gupta, Gartner VP for Emerging Technologies and Trends, said that this is a plausible justification for the move.

"Being fully owned by Intel was potentially limiting customers for IMS, especially while working on an emerging area like multi-beam mask writing which is relevant for EUV. Now selling off a 20 percent stake to Bain, could that open more gates, maybe?" Gupta told us.

"Also, under Intel ownership, it possibly didn't get the right attention/focus/resources to compete with other players in this space. Bain's leadership might be able to support IMS better as they would pay more attention to growing revenue for IMS."

Analyst: Move will generate 'near-term' cash

But Intel could also possibly be driven by financial pressure at the moment. The chipmaker recorded a $2.8 billion loss – its biggest quarterly loss of all time – and profits fell by 134 percent during the first quarter of 2023, when compared with the same period a year ago, due to falling sales in key markets like datacenter servers and PCs.

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At the same time, the company has to maintain investment in new products and new production processes to keep up with its rivals in the semiconductor industry, and in the past week alone has announced $25 billion for a fabrication plant in Israel, a $33 billion project to build a fab in Germany, and $4.6 billion for an assembly and testing facility in Poland.

Selling a 20 percent stake in IMS will generate near-term cash for Intel, Gupta noted, which should amount to the best part of a billion dollars, while the company gets to maintain majority control.

"The space IMS is in isn't Intel's core business and Intel has a lot of other issues to handle at this time, so it makes sense to sell a stake or spin it off while it is still profitable," Gupta added.

IMS CEO Dr. Elmar Platzgummer expressed satisfaction with the deal.

"We are pleased to gain a valuable partner in Bain Capital, which has a long history of partnering with companies to drive growth and value creation," he said, adding: "We look forward to expanding our ability to support the world’s largest chip producers, who rely on our technology to produce current and next generations of semiconductor products."

For its part, Bain Capital said it intended to support the long-term growth of IMS through further investment in its leading-edge technology.

"We believe IMS is well positioned to capitalize on attractive secular tailwinds as additional chip production capacity comes online, and build on its leading competitive position, tech differentiation and cutting-edge product capabilities," said Bain Capital partner Marvin Larbi-Yeboa.

The transaction is expected to close in the third quarter of 2023, and IMS will continue to operate as a standalone Intel subsidiary led by Dr Platzgummer. ®