The US government has granted Intel up to $7.87 billion to fund new chip plants across four states.
The grant is the largest award under the Biden administration’s program to revitalize domestic chip manufacturing.
This funding, allocated under the 2022 CHIPS Act, reflects the strategic effort to reduce reliance on foreign-made semiconductors and bolster national security.
Key Highlights of the Grant
- Funding Scope: Intel’s award is slightly less than the $8.5 billion initially estimated due to previously announced funding of $3 billion for secure facilities manufacturing microchips for U.S. military and intelligence applications.
- Disbursement Conditions: The funds will be released based on specific milestones, with Intel expected to receive at least $1 billion by the end of this year.
- Restrictions: Under the agreement, Intel has committed to avoiding stock buybacks for five years.
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Investment in Domestic Manufacturing
Intel plans to use the funding to construct and expand chip manufacturing facilities in Arizona, New Mexico, Ohio, and Oregon.
The company will also apply for tax credits associated with the program but has opted not to draw on up to $11 billion in government loans initially available under the CHIPS Act.
The CHIPS Act’s $53 billion funding initiative aims to address the US’s diminished share of global semiconductor production—which stood at just 12 percent in 2020—and safeguard against supply-chain disruptions like those experienced during the COVID-19 pandemic.
Additionally, the program emphasizes producing chips critical for Pentagon applications.
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Challenges and Strategic Goals
For Intel, the award provides financial support for CEO Pat Gelsinger’s ambitious turnaround plan. Since taking over three years ago, Gelsinger has focused on:
- Expanding Intel’s chip-making capacity.
- Launching a new business model to manufacture chips on contract for third-party clients.
- Catching up with rivals TSMC and Samsung in producing cutting-edge semiconductor technology.
Intel’s efforts have faced significant challenges, including job cuts and declining performance in its core chip business, which has been overshadowed by Nvidia’s dominance in graphics processing units for artificial intelligence applications.
Intel’s stock has declined 51 percent this year, underscoring the difficulty of executing its turnaround strategy.
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Broader Implications and Future Developments
The CHIPS Act’s grants represent a broader push by the federal government to reshape critical industries for national security.
The administration aims to finalize additional awards in the coming weeks, reflecting President Biden’s priority to complete significant portions of this initiative before his term ends.
However, the program has drawn criticism. Vivek Ramaswamy, biotech founder and member of President-elect Donald Trump’s government efficiency team, described the grants as “wasteful subsidies” and called for a review of the CHIPS Act’s contracts.
Alongside Elon Musk, Ramaswamy has been tasked with reducing government spending as part of the incoming administration’s agenda.
A Pivotal Moment for Intel
While the CHIPS Act funding provides a critical lifeline for Intel, its success hinges on meeting milestones, navigating competitive pressures, and achieving technological advancements.
The next few years will be pivotal for Intel as it seeks to regain leadership in a rapidly evolving global semiconductor market.
