Intel, US govt to sign $8.5 bln in chips funding by year-end

Intel is on the verge of finalising a significant funding agreement with the US government, potentially securing $8.5 billion in direct financial support by the end of the year, according to a report by the Financial Times. Sources familiar with the discussions have indicated that the negotiations are in an advanced stage, although there is no absolute certainty that the deal will be completed before the close of 2024.

This funding is part of a broader initiative by the US government to bolster domestic semiconductor production, an industry that is increasingly viewed as critical to national security and economic competitiveness. Earlier this year, in March, US President Joe Biden announced nearly $20 billion in grants and loans to Intel, aimed at revitalising the company’s semiconductor chip manufacturing capabilities within the United States.

The preliminary agreement includes $8.5 billion in grants and up to $11 billion in loans, with a substantial portion of the funds earmarked for Intel’s operations in Arizona. This funding will support the construction of two new factories and the modernisation of an existing facility, reinforcing Intel’s efforts to regain its competitive edge in the global chipmaking industry.

However, the report also noted that any potential acquisition or significant restructuring of Intel’s business could complicate or even jeopardise the finalisation of this funding agreement. Notably, Qualcomm has reportedly approached Intel about a possible acquisition, as the troubled chipmaker continues to navigate a challenging landscape.

Intel, once the leading force in semiconductor manufacturing, has faced significant setbacks in recent years. The company has ceded its manufacturing dominance to Taiwan Semiconductor Manufacturing Co. (TSMC) and has struggled to produce a chip that could meet the high demands of the generative artificial intelligence market, a sector where NVIDIA and AMD have excelled.

The anticipated funding from the US government is seen as a critical component of Intel’s strategy to regain its footing. By boosting its domestic manufacturing capabilities, Intel hopes to close the gap with its competitors and reclaim its position as a leader in the semiconductor industry.

As the year-end approaches, the successful finalisation of this deal will be crucial for Intel, both for its immediate operations and its long-term strategic goals. The support from the US government could provide the necessary resources for Intel to overcome its recent challenges and re-establish itself as a dominant player in the global semiconductor market.