SoftBank to buy $2 billion in Intel shares at $23 each — firm still owns majority share of Arm

SoftBank Group late on Monday announced a plan to purchase $2 billion worth of Intel shares at $23 each, which will provide the troubled chipmaker much-needed cash. The companies inked a definitive securities purchase agreement, which sets the price of Intel stock (currently trading below its book value) at which the Japanese company will buy it. Softbank also still owns a majority share of Arm.

Intel and SoftBank frame the deal as a way to 'deepen their commitment to investing in advanced technology and semiconductor innovation in the United States.' Given the context of Intel's recent struggles, this $2 billion share purchase is a way to pour some money into Intel's efforts to rebuild itself as a leading supplier of processors and a contract chipmaker that serves both internal and external needs for leading-edge semiconductor production. 

By modern foundry standards, $2 billion is not a large sum of money. Building a single leading-edge semiconductor production facility today typically costs between $20 billion and $30 billion, and in many cases even more, depending on planned production volumes, product mix, and equipment used. However, the investment does not seem to be entirely about money, even though $2 billion will be instrumental for Intel, which bleeds billions every quarter. 

To a large degree, this investment is a vote of confidence in the future of Intel's U.S.-based leading-edge semiconductor production and SoftBank's plan to play a bigger role in the ongoing AI revolution, which will require partnerships with many industry players. If Intel succeeds with its next-generation products and 18A as well as 14A process technologies, then SoftBank will get a partner with a huge potential, which will be important across multiple fronts, including access to advanced semiconductor production capacities (good news for Arm and Ampere that are controlled by SoftBank) as well as a leverage in negotiations with other partners.

"Semiconductors are the foundation of every industry. For more than 50 years, Intel has been a trusted leader in innovation," Masayoshi Son, Chairman & CEO of SoftBank Group. "This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role." 

Additionally, SoftBank may consider an investment in Intel, as it represents undervalued infrastructure that could drive significant advancements in the high-tech sector and substantially increase its value. At $23 per share, Intel is trading below its book value with a market capitalization of around $103 billion. By contrast, the company's real estate and manufacturing assets cost $109 billion. So for SoftBank, this is both a financial opportunity (buying undervalued assets) and a strategic move (securing a stake in the perfectly set semiconductor production infrastructure needed to produce chips that support AI in one way or another). 

"We are very pleased to deepen our relationship with SoftBank, a company that is at the forefront of so many areas of emerging technology and innovation and shares our commitment to advancing U.S. technology and manufacturing leadership," said Lip-Bu Tan, CEO of Intel. "Masa and I have worked closely together for decades, and I appreciate the confidence he has placed in Intel with this investment."

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