Intel and Biden Administration finalize $7.86B CHIPS Act grant for domestic manufacturing

The U.S. Department of Commerce announced on Tuesday that it has awarded Intel $7.865 billion under the CHIPS and Science Act, a federal law signed by President Joe Biden in 2022 to boost U.S. semiconductor manufacturing. This funding will support advanced manufacturing and packaging projects at Intel facilities in Arizona, New Mexico, Ohio, and Oregon.

Intel CEO Pat Gelsinger emphasized the importance of bipartisan support for rebuilding American technological leadership, stating, “These historic investments are vital to the nation’s long-term economic growth and national security. Intel is committed to expanding our U.S. operations in the coming years.”

The funding falls short of the $8.5 billion initially announced in March, when the White House stated that the Department of Commerce had reached an agreement to grant Intel up to that amount.

Intel is undergoing a transition to a “foundry” model, where it manufactures chips designed by other companies, such as Amazon Web Services (AWS), with which Intel signed a deal in September. To support this shift, Intel has been increasing its capacity, including a $20 billion investment in new fabrication (or "fab") facilities in Arizona, part of the company's broader efforts to establish its foundry business. In February, Intel rebranded this unit as Intel Foundry, later spinning it off into a subsidiary in September.

Globally, Intel is involved in numerous large construction projects. Although it recently delayed projects in Germany and Poland by a couple of years, the company is moving ahead with the construction of two new plants in Ohio at a projected cost of up to $28 billion. Production, initially set for 2025, has been delayed due to market challenges.

Intel’s overall domestic manufacturing investment is projected to reach $100 billion by the end of the decade, including both new builds and refurbishments. However, the company has faced significant setbacks, including a poor Q2 report and a workforce reduction of 15%, or 15,000 employees, as part of a broader cost-cutting plan to save $10 billion by 2025. Intel's Foundry business also saw a rise in losses last year, while regulatory hurdles led the company to abandon a $5.4 billion merger with Tower Semiconductor. Instead, Intel formed a partnership with Tower, committing to provide manufacturing capacity as part of a $300 million investment.

Amid the U.S. push to reduce reliance on foreign chip manufacturing, especially following supply chain disruptions during the pandemic, Intel has been positioned as a key player in bolstering domestic production. White House deputy chief of staff Natalie Quillian remarked, “Today’s award is a significant step in implementing President Biden’s CHIPS and Science Act and the Investing in America agenda to bring manufacturing back, create well-paying jobs, and strengthen the economy.”

In addition to the $8 billion in direct funding, which will be awarded in milestone-based installments, Intel will also benefit from a 25% investment tax credit from the U.S. Treasury Department. The company recently secured a separate $3 billion contract to manufacture advanced semiconductors for the U.S. government as part of a national security initiative.