US To Reduce Intel’s $8.5bn Award Amidst Business Troubles

Matthew Broersma,
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Intel CEO Pat Gelsinger speaks with President Joe Biden during a tour of an Intel semiconductor factory in Chandler, Arizona. Image credit: Intel

Biden administration to reduce Intel’s $8.5bn preliminary award under Chips Act as company lays off 15,000 staff, delays investments

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The administration of US president Joe Biden is to reduce Intel’s preliminary $8.5 billion (£6.8bn) federal grant under the Chips and Science Act to take into account Intel’s own reduced expansion plans, the New York Times reported.

Intel, the biggest recipient of Chips Act funding, will see its award drop to less than $8bn, the report said, citing unnamed sources.

The administration’s decision follows Intel’s decision to delay some of its planned investments into chip facilities in Ohio, a project it now intends to finish by the end of the decade instead of next year.

Intel is in the process of laying off some 15,000 staff and reducing its costs after making the biggest quarterly loss in its 56-year history.

Workers in a semiconductor plant. Image credit: Intel
Image credit: Intel

Financial troubles

The decision also takes into account Intel’s technology road map and its difficulties in finding customers for its contract chip manufacturing business, which competes with market leader TSMC, the report said.

Intel is in line for a $3bn contract to manufacture chips for the US military, and the size of that contract also reportedly played a role in the decision to reduce Intel’s Chips Act award.

The military contract and the Chips Act award together amount to more than $10bn.

Intel lobbied extensively for the Chips Act’s passage and was seen as its largest beneficiary.

In addition to direct funding, it was offered $11bn in federal loans and a 25 percent tax credit for its investments in new factories.

Domestic chips

The Commerce Department’s preliminary award, announced in March, supported Intel’s expansion of existing facilities in Arizona, New Mexico and Oregon and the construction of two new factories in Ohio.

The Commerce Department has been rushing to finalise Chips Act contracts before a new administration takes over in January.

Earlier in November it said it completed the terms of a $6.6bn grant to Taiwan Semiconductor Manufacturing Co (TSMC) for the expansion of its plans for two facilities in Phoenix, Arizona and the addition of a third, newly announced plant.

TSMC’s plants are intended to manufacture chips using the world’s most advanced processes on US soil for the first time.