Intel has managed to secure US$7.86bn in subsidies from the US administration under the CHIPS Act initiative.
The deal is set to focus more on the enhancement of domestic production of semiconductors, though with conditions and could make Intel change all its strategies related to its Chipmaking arm, Intel Foundry.
US Semiconductor Manufacturing Thrives With the New CHIPS Act
The US government, based on Reuters, pledged $39 billion in funding of semiconductors with the help of the CHIPS Act. This also comes into step with the plan to minimize dependency on foreign chipmakers in the likes of TSMC, the primary supplier of Apple.
It comes at a time when COVID-19 has exposed vulnerabilities in global supply chains that call for a response.
Through subsidies, the government expects the production of chips to stay within the country; it, therefore, further reinforces the technological sovereignty of the nation while preserving its advantage in competitive industries like AI, 5G, and defense.
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Intel's Chipmaking Expansion and New Subsidy Conditions
Intel's chief executive, Pat Gelsinger, said earlier this year it would spin off its manufacturing division into a subsidiary that it called Intel Foundry, and the company has already signaled it is open to attracting outside investors into this group. However, under the terms of the subsidy, the chipmaker finds itself severely limited.
Under the subsidy agreement, Intel cannot let Intel Foundry become more than 50.1% owned by anyone else than itself.
If the unit becomes a public company, Intel cannot sell more than 35% of Intel Foundry to a single shareholder without the activation of "change-in-control" clauses.
Any significant change in ownership would need prior approval from the US Department of Commerce.
These conditions show the government's intent to ensure that crucial semiconductor production assets are maintained strongly under US control, thus minimizing possible risks emanating from foreign investments or control.
Why Intel Must Be Compliant
It is critical for Intel to meet these conditions to continue its aggressive $90 billion investment in US facilities, including cutting-edge manufacturing projects in states like Arizona, New Mexico, Ohio, and Oregon.
By adhering to these restrictions, the semiconductor giant secures a competitive edge in advancing its chip technologies while benefiting from government support. The subsidy not only fuels Intel's efforts to innovate but also positions the company as one of the most established semiconductor manufacturers in America.
What This Means for the Industry
The subsidy deal is part of a larger trend where governments around the world are intervening to secure semiconductor supply chains. Since TSMC, among others, also received large amounts of funding, it makes things more challenging for companies like Intel to maintain a lead in the industry.
The provisions attached to the subsidy deal may create a precedent for future deals. They emphasize accountability and indicate the commitment of the US government to ensuring that such taxpayer-funded investments eventually generate long-term national benefits.
The $7.86 billion subsidy deal, approved for Intel, symbolizes a turning point not just for the company itself, but for the US semiconductor industry as a whole. The restrictions may curtail Intel's leeway, but the broad vision is to secure the technology future of America.
In another Intel-related report, VideoCardz reported that the Intel Arc B680 "Battlemage" limited edition card was spotted on a listing at $259.
