SAN FRANCISCO – The Biden administration plans to reduce Intel’s preliminary US$8.5 billion (S$11.5 billion) federal Chips grant, a move that follows the US tech giant’s investment delays and broader business struggles.
Intel, the biggest recipient of money under the Chips Act, will see its funding drop to less than US$8 billion from the US$8.5 billion that was announced earlier in 2024, four people familiar with the grant said.
They all spoke on the condition of anonymity because the final contract had not yet been signed. The change in terms takes into account a US$3 billion contract Intel has been offered to produce chips for the US military, these people said.
The government’s decision to reduce the size of the grant follows Intel’s move to delay some of its planned investments in chip facilities in Ohio.
The company now plans to finish that project by the end of the decade instead of 2025. The chip maker has been under pressure to reduce costs after posting its biggest quarterly loss in the company’s 56-year history. Intel’s sales declined 6 per cent in its most recent quarter, and it is in the process of cutting 15,000 jobs.
The move by the Biden administration also takes into account Intel’s technology road map and customer demand. Intel has been working to improve its technological capacity to catch up to such rivals as Taiwan Semiconductor Manufacturing Co (TSMC), but it has struggled to convince customers that it can match TSMC’s technology.
Intel’s troubles have been a blow to the Biden administration’s plans to rev up domestic chip manufacturing. In March, President Joe Biden travelled to Arizona to announce Intel’s multi-billion-dollar award and said the company’s manufacturing investments would transform the semiconductor industry.
Intel’s investment was at the forefront of the administration’s ambition to return chip manufacturing to the United States from Asia. The Chips Act, a bipartisan Bill passed in 2022, provided US$39 billion in funding to subsidise the construction of facilities to help the US reduce its reliance on foreign production of semiconductors.
To prevent taxpayer money from being wasted, US Commerce Department officials set milestones for the companies to meet in order to get funds. The benchmarks included building a plant, producing chips and signing up customers to buy domestically produced products.
Intel, which lobbied aggressively for the Bill’s passage, was long seen as the law’s biggest beneficiary.
But its business struggles complicated its negotiations over its final award. The Commerce Department had granted the initial award to support Intel’s expansion of operations in Arizona, New Mexico and Oregon, as well as the construction of two plants in Ohio.
Intel and the Commerce Department declined to comment about the reduction in funding.
The Biden administration says that the programme has already spurred significant growth in new factory construction, and that the US is set to be the only country with factories from all five of the world’s leading chip manufacturers.
Few stood to benefit more from the programme than Intel. In addition to a direct grant, the Biden administration offered up to US$11 billion in federal loans and a 25 per cent tax credit for its investments in new factories.
Intel is also slated to receive a US$3 billion government contract to make chips for the military. The size of that contract contributed to the Commerce Department’s decision to reduce its award to Intel, said two of these people.
The Biden administration has been concerned about Intel’s ability to fulfill its investment commitment. As the company struggled to find customers for its new plants, Commerce Secretary Gina Raimondo tried to help by encouraging executives at Google, Microsoft, Amazon and Apple to have Intel make chips for their products in the US.
“Of course, I’d be doing everything I can to make sure Intel is successful,” Ms Raimondo said in an interview with The New York Times in October. “But really, my message to any of these companies – whether it’s Apple or AMD or Nvidia, Amazon, all of them – is we need your demand for US-made chips.” NYTIMES
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