US Invests Billions in Intel for Domestic Chip Production

The global semiconductor industry has become a focal point of geopolitical tensions and economic strategy in recent years.

As nations vie for technological supremacy, the ability to design and manufacture advanced chips has emerged as a critical factor in economic growth, national security and innovation across various sectors.

The US, once a leader in semiconductor production, has seen its share of global chip manufacturing decline to about 12% in 2024, down from 37% in 1990.

This shift has prompted concerns about supply chain vulnerabilities and dependence on foreign producers, particularly in Asia.

In response to these challenges, the US government has taken significant steps to revitalise its domestic semiconductor industry.

The CHIPS and Science Act, passed in 2022, allocated US$52.7bn to boost American chip production and research.

This initiative aims to reduce reliance on foreign suppliers, enhance national security and create high-skilled jobs within the US.

Intel secures major government funding

The US Commerce Department has announced the finalisation of a US$7.86bn grant for Intel Corporation, a leading American semiconductor company.

This substantial investment, part of the CHIPS and Science Act, is designed to support Intel's ambitious US$90bn manufacturing expansion across four states: Arizona, New Mexico, Ohio and Oregon.

The grant represents a reduction from the initially proposed US$8.5bn, announced in March 2024.

This adjustment follows Intel's separate US$3bn award from the Pentagon, which was funded from the same pool of manufacturing subsidies.

US Commerce Secretary Gina Raimondo emphasises the significance of this investment to Reuters: "That means American-designed chips being manufactured and packaged by American workers in the US by an American company for the first time in a very long time".

Intel has already met some initial project milestones and is set to receive at least US$1bn of the award before the end of December 2024, according to a government official.

Intel challenges and strategic shifts

The finalisation of this grant comes at a crucial time for Intel, which has faced challenges in recent years.

The company has experienced narrowing margins and implemented significant workforce reductions, laying off thousands of employees.

These measures follow a period of heavy spending under Chief Executive Pat Gelsinger's leadership.

Despite these difficulties, Intel remains committed to its expansion plans.

“Strong bipartisan support for restoring American technology and manufacturing leadership is driving historic investments that are critical to the country's long-term economic growth and national security,” he told Reuters.

Interestingly, Intel has opted not to finalise a separate US$11bn low-cost government loan that was offered in March.

Reuters says the company stated that the loan terms: "were less favourable than anticipated for Intel's shareholders and did not align with Intel's long-term growth and market interests".

However, Intel has expressed interest in potentially utilising loan provisions in the future.

In addition to the direct grant, Intel plans to claim the Treasury Investment Tax Credit, which is expected to be up to 25% of qualified investments exceeding US$100bn.

Economic impact and job creation

The Intel investment is expected to have a significant impact on the US economy and job market.

According to the US Department of Commerce, Intel's overall expansion plan is estimated to support approximately 10,000 manufacturing jobs and 20,000 construction jobs across the four states involved in the project.

In Arizona, Intel is investing more than US$32bn to establish two chip factories and modernise an existing facility at its Ocotillo campus in Chandler.

The company's expansion plans in the state are on track with its plans to begin high-volume production of its Intel 18A process node in 2025.

New Mexico will see an investment of over US$4bn to advance the production of Intel's 3D packaging technology, called Foveros, and other advanced chip packaging capabilities.

In Ohio, the company is investing more than US$28bn to build two leading-edge chip factories in New Albany, while in Oregon, plans include an investment of over US$36bn in Hillsboro to facilitate the delivery of Intel 18A and other process technologies beyond 2025.

US Commerce Secretary Gina Raimondo noted that the Intel award was the sixth to be finalised under the CHIPS and Science Act, with more to be completed in the coming weeks.

She assured that these awards were being finalised: "in a way that protects and safeguards taxpayer dollars".

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