Supporting Domestic Semiconductor Production
The U.S. Commerce Department has finalized a $7.86 billion subsidy for Intel ($INTC) to bolster domestic semiconductor manufacturing, down from an earlier $8.5 billion announced in March. The reduction follows Intel’s separate $3 billion award from the Pentagon, which adjusted the allocation of federal funds.
The funding supports nearly $90 billion in manufacturing projects across Arizona, New Mexico, Ohio, and Oregon, marking a significant investment in reshoring chip production. Commerce Secretary Gina Raimondo emphasized the milestone, stating, “American-designed chips [are] being manufactured and packaged by American workers in the United States by an American company for the first time in a very long time.”
Meeting Milestones Amid Industry Challenges
Intel has already met initial project milestones, with at least $1 billion of the award set for disbursement before year-end. Officials clarified that the grant reduction was unrelated to Intel’s broader financial struggles, which include narrowing margins and workforce reductions.
CEO Pat Gelsinger, reflecting on bipartisan support for the initiative, highlighted its importance for the nation’s economic growth and security: “Strong bipartisan support for restoring American technology and manufacturing leadership is driving historic investments.”
A Record-Breaking Award Under Federal Funding
This subsidy represents the largest award under the 2022 CHIPS and Science Act, which allocates $52.7 billion to boost domestic semiconductor output, including $39 billion for production and $11 billion for research. The $3 billion Pentagon contract, awarded in September, was funded through the manufacturing subsidies rather than the Pentagon’s budget, prompting the reduction in Intel’s direct grant.
Strategic Decisions on Loans and Tax Credits
Intel opted not to finalize an $11 billion government loan offered in March, citing unfavorable terms for shareholders. However, the company plans to utilize the Treasury Investment Tax Credit, which provides up to 25% of qualified investments exceeding $100 billion.
Accountability and Safeguards
The Commerce Department’s award includes measures to protect taxpayer dollars, such as a five-year restriction on stock buybacks and provisions to share excess profits. Raimondo noted additional awards are forthcoming, signaling continued investment in revitalizing U.S. chip production.
Looking Ahead
Intel’s substantial federal funding, combined with private investments, positions the company as a key player in reshoring critical semiconductor manufacturing, while addressing national security and economic priorities. These efforts are part of a broader push to reduce reliance on foreign supply chains and restore U.S. technological leadership.