Monday, July 09, 2012

(BN) Intel Agrees to Buy 15% of ASML in $4.1 Billion Investment (2)

July 9 (Bloomberg) -- Intel Corp., the world's largest semiconductor maker, agreed to invest as much as $4.1 billion in chip equipment maker ASML Holding NV in an effort to shave two years from the time to deploy new production techniques.

The U.S. company will take an initial 10 percent stake in ASML for about $2.1 billion, and later take an additional 5 percent stake for about $1 billion pending shareholder approval, Santa Clara, California-based Intel said today in a statement. ASML will also get about $1 billion more in stages to speed up the delivery of new equipment needed for larger silicon wafer-based production.

ASML's machines perform a crucial step in the process of making computer chips called lithography. Such machines can take years to prepare and deliver. Intel and its competitors need to retool manufacturing as they transition to 450-millimeter disks of silicon from the current 300-millimeter standard, a move designed to increase output and reduce costs.

"Intel realizes they need 450 sooner than anyone can give it to them," said Patrick Wang, a New York-based analyst for Evercore Partners Inc. "If they see a limit, down the road, which presumably they are, you could argue" it's a good use of cash. He rates Intel shares equal weight.

The transition to larger wafers will deliver a reduction of 30 percent to 40 percent in the cost of a chip, Intel Chief Operating Officer Brian Krzanich said in the statement.

"The faster we do this, the sooner we can gain the benefit of productivity improvements, which creates tremendous value for customers and shareholders," Krzanich said.

Intel's shares fell 1.3 percent to $25.83 at 5:43 p.m. Eastern time. Earlier, the stock rose 0.1 percent to close at $26.17 in New York, for an advance of 7.9 percent this year.

ASML is seeking to sell up to 25 percent of itself to Intel and other chipmakers, according to the release.

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