On Tuesday, the U.S. Commerce Department announced that it is finalising a government subsidy of $7.86 billion for Intel. This figure represents a reduction from the previously announced $8.5 billion in March, following Intel’s receipt of a separate $3 billion award from the Pentagon.
The funding initiative will bolster nearly $90 billion in manufacturing endeavours across Arizona, New Mexico, Ohio, and Oregon.
Commerce Secretary Gina Raimondo emphasised the significance of American-designed chips being produced and packaged by American workers within the United States
, marking a notable return for an American company after a considerable period.
Intel has achieved several initial project milestones and is set to receive a minimum of $1 billion from the award by the end of December, according to a government official who spoke to reporters. The official emphasised that the reduction in the grant is unrelated to Intel’s broader challenges this year.
The chipmaker has experienced a contraction in margins. It has made the difficult decision to lay off thousands of employees following years of significant expenditures under the leadership of Chief Executive Pat Gelsinger.
The $7.86 billion subsidy is the most substantial award granted under 2022 legislation to enhance domestic semiconductor production. This initiative is backed by a total funding of $52.7 billion, which allocates $39 billion specifically for semiconductor manufacturing and $11 billion for research.
In September, Intel secured a $3 billion contract with the Defence Department following the announcement of $8.5 billion in grants. The Pentagon contract funding was sourced from the $39 billion designated by U.S. lawmakers for chip manufacturing subsidies rather than from the Pentagon’s budget. This shift decreased Intel’s direct grant award, according to statements from both the company and a government official.
On Tuesday, Gelsinger emphasised that the robust bipartisan backing for revitalising American technology and manufacturing leadership propels unprecedented investments essential for the nation’s sustained economic growth and national security.
Intel has decided against finalising a separate $11 billion low-cost government loan proposed in March.
On Tuesday, the company announced 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.” The organisation anticipated discussions with the new administration regarding the potential use of loan provisions.
Intel announced its intention to pursue the Treasury Investment Tax Credit, which is anticipated to reach as much as 25% of qualified investments exceeding $100 billion.
Raimondo highlighted that the Intel award marks the sixth finalised agreement, with additional awards expected to be completed in the upcoming weeks. She stated that the awards were being finalised “in a manner that protects and safeguards taxpayer dollars.”
The Commerce award imposes a five-year ban on stock buybacks and mandates the sharing of “meaningful” excess profits.
