U.S. Finalizes $7.86 Billion Chips Manufacturing Subsidy for Intel
WASHINGTON, Nov 26 (Reuters) – The U.S. Commerce Department announced on Tuesday the finalization of a $7.86 billion subsidy for Intel Corporation (INTC.O). This marks a reduction from the $8.5 billion initially announced in March, following Intel’s separate $3 billion contract with the Pentagon.
The funding is part of Intel’s nearly $90 billion investment in manufacturing projects across Arizona, New Mexico, Ohio, and Oregon.
Commerce Secretary Gina Raimondo highlighted the significance of the initiative, saying, “This ensures American-designed chips are being manufactured and packaged by American workers in the United States by an American company – something we haven’t seen in a long time.”
Milestones and Early Disbursement
Intel has already achieved some key project milestones and is set to receive at least $1 billion of the subsidy by the end of December, according to a government official. The reduction in grant size is unrelated to the company’s recent challenges, which include narrower profit margins and significant layoffs under CEO Pat Gelsinger.
Despite these hurdles, the $7.86 billion award is the largest under the 2022 CHIPS and Science Act. The legislation allocates $52.7 billion to boost domestic semiconductor production, with $39 billion dedicated to manufacturing and $11 billion for research.
Pentagon Contract and Funding Reallocation
In September, Intel secured a $3 billion Pentagon contract. The funding for this award came from the $39 billion semiconductor manufacturing subsidies rather than the Defense Department’s budget, prompting a reduction in Intel’s direct grant amount.
CEO Pat Gelsinger emphasized bipartisan support for advancing U.S. technology and manufacturing, calling these investments crucial for economic growth and national security.
Loan Opt-Out and Tax Credit Plans
Intel declined a separate $11 billion low-cost government loan offered in March, citing unfavorable terms for its shareholders. The company remains open to exploring loan options under future administrations.
Intel also plans to utilize the Treasury Investment Tax Credit, potentially worth up to 25% of qualified investments exceeding $100 billion.
Safeguarding Taxpayer Interests
Secretary Raimondo noted that this marks the sixth award finalized under the CHIPS Act, with more to follow in the coming weeks. She stressed that safeguards, including restrictions on stock buybacks for five years and mechanisms to share excess profits, are in place to protect taxpayer dollars.
Intel’s substantial government support reflects a broader push to strengthen domestic semiconductor production and secure the supply chain for critical technologies.
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