Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Intel Takes 15 Percent Stake in ASML as Part of Research Deal

Meanwhile, elsewhere in the world of semiconductors, Intel, the world’s biggest chipmaker, and the Dutch firm ASML just announced a complicated $4.1 billion deal under which Intel is proposing to take a 15 percent ownership stake in ASML as part of a wider research agreement.

The research in question will be around using 450-millimeter wafers. In English, wafers are the big, round pieces of silicon from which individual computer chips are made. The current industry standard is for 300-millimeter wafers, which are almost exactly one foot across, or about the size of a standard dinner plate at any decent restaurant.

The point of moving to bigger wafers — 450 millimeters is about a foot and a half — is to get more chips out of a single piece of silicon. But it’s not something you can do overnight. Back in the late 1990s, when I worked for a chip industry trade newspaper, I heard a lot about the transition from “10-inch wafers to 12-inch wafers,” and it was a complicated process that took several years. Intel CEO Paul Otellini is pictured at right holding a wafer; though I think it’s an older 10-inch wafer, I may be wrong.

Since the process for manufacturing chips is both expensive and incredibly precise, switching to a larger standard piece of silicon is no trivial matter, and it’s going to take some time and money. ASML CFO Peter Winnick explains it all in a video here.

ASML is a $7.3 billion (2011 sales) company that makes the equipment that companies like Intel use in its factories, known in industry lingo as “fabs.” Since Intel is the biggest in the world, as Intel goes, so goes the rest of the world. Now that Intel has thrown in seriously on moving its manufacturing processes to support 450-millimeter wafers, that means two things: Other companies will have to do it, too, eventually. Also, older 300-millimeter manufacturing processes will migrate down to manufacturing lines cranking out lower-end chips. They’ll benefit from the same increase in efficiency that comes from larger wafers.

The deal calls for a few things. First, Intel will put about $1 billion toward ASML’s research and development into building chipmaking gear that can handle the larger wafers, but also also into advanced technologies using extreme ultraviolet light to etch the ever-smaller circuits on chips.

Second, Intel will take a 10 percent stake in ASML for about $2.1 billion. It will then commit to take another 5 percent later on. All in, the deal is being valued at about $4.1 billion.

ASML shares are trading up in after-hours by $2.88,or nearly 6 percent,to $51.20. As of 4:50 pm ET, Intel share are down by 34 cents, or more than 1 percent, but that’s got to be primarily in response to AMD’s big sales warning.


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