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Uncle Sam Slips Intel $20B for New Chip Factories

Uncle Sam in FactoryThe US will award Intel Corporation $8.5 billion in grants and as much as $11 billion in loans to help fund an expansion of its semiconductor factories, the Commerce Department announced Wednesday, marking the largest award from a program designed to reinvigorate the domestic chip industry.

The package will support more than $100 billion in US investments from Intel, including efforts to produce cutting-edge semiconductors at large-scale plants in Arizona and Ohio, the department said on Wednesday. The money also will help pay for equipment research and development and advanced packaging projects at smaller facilities in Oregon and New Mexico.

Intel has stated its intentions to utilize investment tax credits from the Treasury Department which has the potential to compensate up to 25% of capital expenditures, as reported by the Commerce Department.

This aid originates from the 2022 Chips and Science Act, allocating $39 billion in grants. In addition to this, loans and assurances worth $75 billion are set to persuade semiconductor corporations to establish factories within the United States. The initiative is an attempt to reverse the longstanding trend of transferring semiconductor production to Asia. Commerce Secretary Gina Raimondo has expressed that the ultimate aim for the US is to manufacture one fifth of the global advanced logic chips by the closing of the decade. Intel’s investments are a critical component in achieving this objective.

The planned facilities form an integral part of Intel’s ambitious turnaround strategy under the leadership of CEO Pat Gelsinger. This scheme has included the development of a foundry business dedicated to producing chips for other organizations, with Microsoft Corporation recently sealed as a significant client.

Gelsinger also has been trying to restore Intel’s technological capabilities. In recent years, the company had fallen behind Asian rivals Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. in that area. They too are stepping up US expansion plans and are expected to receive their own Chips Act awards in the coming weeks.

Intel LogoIntel is the first company to land a preliminary Chips Act funding deal for advanced chipmaking facilities. Earlier awards went to companies producing older-generation semiconductors. A senior administration official declined to specify how much federal funding will go to each of Intel’s projects, describing the award as a holistic agreement.

Gelsinger said that it’s been economically uncompetitive to build plants in the US compared with East Asia. These awards help redress that imbalance, he said. The US’s loss of chip manufacturing took place over decades, and it may take more than the current program of support to fully reverse that trend.

“I do think we’ll need a Chips II,” he said, speaking with reporters ahead of the event. “It doesn’t get fixed on one three-to-five-year program.”

The funds will be issued post a due diligence phase and will be gifted in portions related to manufacturing objectives and other standards established by the Department of Commerce. The representative, who sought anonymity while briefing journalists prior to the proclamation, refrained from stating those goals, stating they would be further detailed as Intel approaches a final agreement. Commerce representatives anticipate the money to commence distribution by this year end, the official announced.

The grant to Intel will be the most significant single award announcement to any Chips beneficiary,” said Raimondo, communicating to the media prior to the revelation. She added that these endeavors will yield over 30,000 construction and manufacturing jobs across four states, highlighting an earmarked $50 million in Intel’s award particularly for employment growth.

The job creation timeline will differ from one facility to another, the official emphasized, reiterating that Intel’s construction agendas remain consistent with their initial estimations. There was a concern around Intel’s shares dipping earlier this year post a delay report in Ohio by the Wall Street Journal.

Uncle Sam CashThe commencement of several Arizona facilities will be by this year end, the official further stated, and the chip manufacturer anticipates the completion of construction in Ohio to happen by late 2026.

The funding that was revealed on Wednesday is solely aimed at commercial production. However, it is also anticipated that Intel will receive a $3.5 billion grant for the manufacturing of military and intelligence chips. This specific grant has caused some disruption in the broader Chips Act negotiations in recent weeks, due to the Pentagon’s decision to withdraw from a plan that would have covered more than two-thirds of the costs.

The official mentioned that the military’s secure enclave program is handled through a different system, but offered no further updates.

Previously, the Commerce Department announced that awards were given to the American subsidiary of BAE Systems, Microchip Technology and GlobalFoundries. In total, over 600 companies have shown interest in these funds, and just amongst advanced chipmakers, requests have exceeded double the amount of funds set aside for them.

Gelsinger, when questioned if Intel considered the allocated funds to be sufficient, mentioned that both the Commerce Department and his company had gleaned substantial learnings from the negotiations.

“We believe we’ve accomplished our objectives,” he said. “Would I like more? Of course, I’d like more.”


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2 Comments

  1. Your article is quite intriguing. I plan to read it every day. Your article is fantastic. I wished I could read more.

    April 1, 2024 @ 6:04 am | Reply
  2. The representative, who sought anonymity while briefing journalists prior to the proclamation, refrained from stating those goals, stating they would be further detailed as Intel approaches a final agreement.

    May 7, 2024 @ 4:45 am | Reply

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