After awarding Intel funding under the CHIPS and Science Act in September and November 2024 (US$3.2Bn and US$7.9Bn, respectively), the US Department of Commerce (Commerce) announced it would acquire 9.9% of Intel’s common shares for US$8.9Bn, representing a ~20% discount to the prevailing share price. The investment is in the form of 433.3M primary shares, providing capital directly to the company.

The US$8.9Bn investment comprises US$5.7Bn in grants previously awarded but not paid and US$3.2Bn as part of the Secure Enclave obligations. Combined with the US$2.2Bn awarded under the Biden–Harris administration, this brings the total funds provided to Intel by the US government to US$11.1Bn.

Commerce has awarded multiple rounds of funding through the CHIPS and Science Act of 2022 to support Intel’s commercial manufacturing and advanced packaging initiatives across Arizona, New Mexico, Ohio, and Oregon. Combined with a 25% investment tax credit, these incentives have enabled Intel to commit up to US$100Bn toward expanding semiconductor production within the USA.

Despite these efforts, Intel has fallen behind in the foundry business as competitors surged ahead in developing advanced chips and more efficient architectures. The rise of ARM-based designs and the explosive demand for graphics processing units (GPUs) driven by generative AI applications left Intel trailing behind industry leaders such as Nvidia, AMD, and Taiwan Semiconductor Manufacturing Company (TSMC).

Consequently, Intel has concentrated on selling chips to lower-range markets, which are currently oversaturated. However, the company continues to invest in its high-end chip sector, with its 18 angstrom (1.8nm) technology expected to enter mass production in H2 2025.

Reflecting what is likely the government’s view on shoring up Intel’s foundry business, the government has also negotiated a five-year warrant at US$20 per share to acquire an additional 5% of Intel common shares, exercisable if Intel ceases to own at least 51% of its foundry business.

This investment provides short-term support for Intel’s challenging financial position by ensuring that the funding grants awarded under the previous administration are deployed to the company. However, Intel recently announced the cancellation of its projects in Germany and Poland, as well as the slowing of construction activity in Ohio.

The USA has seen growth in its chip manufacturing (foundry), R&D, and packaging sectors, driven by investments from major industry players such as TSMC, Samsung, and SK Hynix. However, this progress comes at a cost. At a conference in July, AMD CEO Lisa Su noted that US-made chips are expected to be approximately 20% more expensive, underscoring the country’s lack of cost competitiveness relative to other producing nations, such as Taiwan.

Furthermore, Chinese advancements in chip technology are likely to lead to significant progress in the domestic industry in the coming years, while the country is also expected to continue to dominate the “legacy” (unsophisticated) chip market.