Struggling Intel Awarded $20 Billion In Chip Incentives For US Plants
Over the past decade, Nvidia has surpassed Intel to become the most valuable semiconductor company in the United States. Intel has encountered significant setbacks in launching new chips and in its ambitious turnaround plan.
However, there is good news: The White House announced Wednesday morning that the US Department of Commerce has reached a "preliminary agreement" with Intel to provide upwards of $8.5 billion in grants and as much as $11 billion in loans under the CHIPS and Science Act to expand semiconductor factories in the US.
The Biden administration's announcement is not a surprise, mainly because Intel has struggled for several years in its turnaround plan. The funding will significantly expand the construction of Intel chip factories in Arizona, Ohio, New Mexico, and Oregon.
According to the Commerce Department, Intel plans to use investment tax credits from the Treasury Department to cover a quarter of capital expenditures.
Shares of Intel trading in premarket in New York rose as much as 4% on the news. Compared with Nvidia and Advanced Micro Devices, Intel has been a serious laggard over the last five years.
It's been a less than wild ride for Intel as the rest of the chip market takes off...
The Biden administration's Chips and Science Act plans to allocate $39 billion in grants, along with loans and guarantees amounting to $75 billion, to incentivize semiconductor companies to build manufacturing plants in the United States.
Commerce Department Secretary Gina Raimondo said the Intel deal is "huge" and one of the largest investments ever in US semiconductor manufacturing.
"It means leading-edge semiconductors made in the United States of America," Raimondo said, adding the nation's share of leading-edge chip production will rise from 0% to 20% by 2030.
Reuters expects the Biden administration to announce awards for South Korea's Samsung and Taiwan's TSMC in the coming weeks.
Intel's turnaround plan only needed a jumpstart with billions of dollars in taxpayer funds. Maybe the company shouldn't blown billions of dollars on stock buybacks.
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