The US government has renegotiated the terms of its financial support for Intel under the landmark CHIPS Act. Instead of traditional subsidies, the presidential administration opted for an unprecedented move, taking a nearly 10% stake in the chipmaker.
This change is expected to provide the company with greater flexibility and accelerate its strategic investments in the US.
The new agreement restates previous arrangements, converting $8.9 billion worth of grants into a stake. The investment is made up of $5.7 billion from the original CHIPS Act pool and $3.2 billion awarded under the Secure Enclave programme to develop advanced semiconductor manufacturing for national security.
This brings the total state involvement in the company to $11.1 billion, after adding the previous $2.2 billion.
A key benefit for Intel is the immediate release of cash and the removal of the requirement to meet certain project ‘milestones’, which had previously conditioned the payment of further tranches.
This gives the company much more leeway in managing funds to expand and upgrade its factories in Arizona, New Mexico, Ohio and Oregon. The condition, however, was to prove that Intel had already invested nearly $7.9 billion in eligible projects.
At the same time, the agreement retains some restrictions – Intel cannot use the funds received for dividends to shareholders or share buybacks.
The government investment is seen as a strategic safeguard to keep the key contract manufacturing (foundry) division under US control.
The decision to take an equity stake in a private technology company on this scale is an unusual move and signals a new, more interventionist approach by the US government to strengthening the domestic semiconductor industry in the face of global competition.
