The Biden administration plans to cut $8.5 billion in federal aid to Intel, another blow to the California-based company after investment delays and broader business difficulties.
Intel a CHIPS Act is the company receiving the most money, but the US government will reduce its support to less than $8 billion from the $8.5 billion announced at the beginning of the year. The final contract has not yet been signed, but the change in terms takes into account a $3 billion contract offered to Intel to make chips for the US military. The government’s decision to reduce the subsidy comes after Intel postponed its planned investment in chip manufacturing facilities in Ohio. The company now plans to complete this project by the end of the decade instead of 2025. The chip maker is under pressure to cut costs after the company posted its biggest quarterly loss in its 56-year history.
The Biden administration’s move also takes into account Intel’s technology roadmap and customer demand. Intel has been working to improve capacity to catch up with rivals such as Taiwan Semiconductor Manufacturing Company, but has struggled to convince customers that it can compete with TSMC’s technology. Intel’s troubles were a blow to the Biden administration’s plans to boost domestic chip production. In March, President Biden personally announced multibillion-dollar support for Intel during a trip to Arizona, saying the company’s manufacturing investments would transform the semiconductor industry.
Intel spearheaded the government’s push to bring chip manufacturing back to the United States from Asia. The CHIPS Act passed in 2022 with bipartisan support and provides $39 billion in funding to support the construction of facilities that will help the United States reduce its reliance on foreign manufacturing for the tiny, critical electronics that power everything from iPads to dishwashers. To ensure that taxpayer money was not wasted, Commerce Department officials set milestones that companies had to meet in order to receive the money. The criteria included building a plant, manufacturing the chips and getting customers to buy domestically made products.
Intel aggressively lobbied for the law’s passage and was long considered the biggest beneficiary of the law, but its business difficulties made negotiations on the final amount difficult. The Commerce Department previously awarded the money to expand Intel’s operations in Arizona, New Mexico and Oregon, and to build two plants in Ohio. The Department has been in a great hurry to finalize contracts and begin disbursing funding under the CHIPS Act. Earlier this month, they announced that they had finalized the terms of a $6.6 billion grant to TSMC. The Taiwanese company is investing more than 65 billion dollars of its own funds in the construction of factories in Arizona.
According to the Biden administration, the program has already resulted in a significant increase in the construction of new factories, and the United States will become the only country where all five of the world’s leading chipmakers have facilities. Few benefited from the program more than Intel. In addition to direct aid, the Biden administration offered up to $11 billion in federal loans and a 25 percent tax credit for investments in new factories. Intel also won a $3 billion government contract to manufacture chips for the military. The size of this contract also contributed to the Commerce Department’s decision to reduce the amount awarded to Intel. The military contract and the CHIPS Act grant together bring the total from the bipartisan bill to more than $10 billion.
Intel CEO Pat Gelsinger was one of the biggest supporters of the CHIPS Act. He met with more than 100 lawmakers before the CHIPS Act was passed, but since then Intel’s business has faltered. Its sales fell 6 percent in the most recent quarter, and it is currently cutting 15,000 jobs. The company said revenue for the current period topped $13.3 billion, beating analysts’ expectations and sending its stock up 12 percent. However, its market value has fallen from a peak of $500 billion in 2000 to $106 billion.
Due to Intel’s problems, it has become a takeover target. In recent months, Qualcomm executives have seriously considered the transaction. The Biden administration was worried about whether Intel could fulfill its investment commitments. As the company struggled to find buyers for its new plants, Commerce Secretary Gina Raimondo tried to help by encouraging executives from Google, Microsoft, Amazon and Apple to use Intel’s U.S.-made chips. “Of course I’m going to do everything I can to make Intel successful,” Raimondo said. “But really, my message to any company — whether it’s Apple, AMD, Nvidia, Amazon, all of them — is that we need their demand for American-made chips. ”
Source: sg.hu
