Yahoo Finance How Intel won $8.5 billion in chipmaking cash from Biden
The award announced Wednesday will be the largest grant in the White House's push to restart semiconductor manufacturing in the US
Intel (INTC) CEO Pat Gelsinger has spent the last three years lobbying Washington to make billions available to American chipmakers, and on Wednesday, that paid off for his company with news of up to $8.5 billion in US grants in the years ahead.
It "will be the single biggest announcement of a grant to any chips recipient," said Commerce Secretary Gina Raimondo in announcing the news.
The preliminary agreement solidifies Intel's place as the centerpiece of President Joe Biden's effort to restart semiconductor manufacturing in the US. Intel says the money will be used across a range of new projects in Arizona, Ohio, New Mexico, and Oregon — where more than $100 billion is being invested in total.
The deal announced Wednesday includes government loans of up to $11 billion. The chipmaker is also set to claim a new tax credit on its capital expenses that could add tens of billions more to its bottom line in the years ahead as Intel focuses on manufacturing capacity to produce its most advanced chips.
"We’ve been the American champion for semiconductors ... and thus we’ve really taken it upon ourselves to drive this legislation forward," Gelsinger told reporters ahead of the announcement.
President Biden and Secretary Raimondo will travel with Gelsinger Wednesday to the company's campus in Chandler, Ariz., to tout the news.
The expansion of that Arizona facility will include the construction of two new leading-edge fabrication plants and the modernization of an existing plant. The White House says it is the largest private sector investment in the state's history and will create 3,000 permanent manufacturing jobs in the state in the years ahead.
How Gelsinger courted Washington
Gelsinger took over as Intel's CEO in February 2021 and was quickly in touch with Biden officials who were also settling into their new offices at about the same time.
He became a key public face of the administration's then-nascent efforts to get the bill that became the CHIPS and Science Act drafted and passed.
He "invested 110% in the Washington side," Stacy Rasgon of Bernstein Research noted in an interview this week.
Gelsinger "even kind of admitted that maybe he was neglecting his other duties to the extent of spending so much time in Washington," the analyst added and noted that the billions coming to Intel from Washington in the years ahead will be crucial as the company tries to achieve its ambitious goals.
The CEO met virtually with Biden in October 2021 and then was in Washington in person the following January where he announced Intel's plans to build a $20 billion facility near Columbus, Ohio.
He was back in D.C. that March to sit in the First Lady's box for the 2022 State of the Union address.
During that speech, Biden used Intel to try and advance the CHIPs legislation by announcing that the company's investment could grow but with one big caveat — "all they're waiting for is for you to pass this bill," he told the assembled lawmakers.
Gelsinger personally applied the pressure even further as negotiations dragged on that year with a widely noticed tweet in July that said the company wouldn't begin major construction in Ohio until Congress acted.
The bill was passed and signed into law later that summer. Gelsinger, of course, was there.
Biden also traveled to Ohio for the formal groundbreaking of that facility that September. "Pat, thank you," he said as massive construction gear loomed in the background.
The outsized role of Arizona
Wednesday's news also underscores Arizona's role as the leading site of Biden's hoped-for resurgence in semiconductor manufacturing in the US.
The Taiwan Semiconductor Manufacturing Company (TSM) is also at work on a flagship fabrication plant in northern Phoenix with the company expected to get its own government grant in the coming weeks.
On Tuesday, a senior administration official tried to keep the focus on Intel's news but added that "active discussions" continue with other major applicants like TSMC.
Arizona has been the site of workforce issues as policymakers and company officials often fret about having enough American workers to staff the new facilities in the years ahead. TSMC recently announced a delay in their Arizona plant's full-scale launch from 2024 to 2025, citing worker shortages as a reason for the delay.
The government's agreement with Intel this week includes an array of provisions around training including $50 million in additional government funding specifically for workforce development from the CHIPS law.
The 19-month-old law allows the White House to spend a total of about $50 billion in taxpayer dollars — $39 billion specifically earmarked for manufacturing — to try and help reignite American manufacturing in the years ahead.
The law also includes an "advanced manufacturing investment credit" to further help induce companies to build out semiconductor manufacturing capacity in the United States that could continue being felt for years to come.
Three smaller manufacturing awards had been previously announced, including roughly $35 million for BAE Systems (BAESY), $162 million for Microchip Technology, and $1.5 billion for GlobalFoundries (GFS).
Raimondo oversees a team of more than 200 people who are charged with implementing the legislation. She recently laid out an ambitious new goal of having the US produce 20% of the world's most advanced semiconductor chips by the end of the decade.
"This announcement is going to put us on track to meet that goal," said Raimondo of the Intel news.
It's an ambitious goal for both Intel and Biden. America produced nearly 40% of the world's chips in 1990, but less than 10% are made in the US today, according to the White House.
The situation is even worse with more advanced semiconductors: 100% of those are currently manufactured overseas, mostly in Taiwan.
And even as his company celebrated the grant this week, Gelsinger himself signaled that his days of lobbying Washington might be far from over.
"I don’t think Chips 1.0 is the end of what we need to do to rebuild the industry," he said, adding: "It doesn’t get fixed in one three- to five-year program."
Ben Werschkul is Washington correspondent for Yahoo Finance.
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