The US chip giant Intel and the US government are in the final negotiation rounds over an assistance package worth 8.5 billion USD, which could be finalized before the end of the year, as people familiar with the matter confirmed to the Financial Times. The discussions, ongoing for several months, are complex and technically demanding as Intel implements drastic cost reductions to stabilize its struggling business.
At the same time, Intel's current situation has piqued the interest of other companies. The chip giant Qualcomm has reportedly considered a possible stake in Intel, while other potential buyers could also emerge. Completion of the government aid package would send a strong signal of the US government's confidence in Intel, even though the company recently paused a major investment project in Germany to improve its financial situation.
If Intel were indeed to enter into an agreement with Qualcomm, it could trigger antitrust concerns since both companies operate in a highly concentrated sector and compete for market share in the PC chip business. The companies could argue that a merger is in the interest of national security, but such arguments have not always convinced US authorities in the past.
The preliminary terms of the state aid package were already announced in March of this year. It would be the largest single package awarded under the "Chips and Science Act"—a program aimed at promoting domestic semiconductor production and reducing dependence on Asian supply chains. This is a key component of US President Joe Biden's industrial policy agenda.
With the promotion, the government aims to strengthen the competitiveness of the US semiconductor industry and particularly secure Intel's position as the "champion" of the American chip industry. Commerce Secretary Gina Raimondo had previously referred to the company as an indispensable component in the US technology infrastructure.
The urgency for concluding the funding grows as the U.S. elections on November 5 approach. Concluding the negotiations before this date would underline the achievements of the Biden administration in industrial funding. Biden himself visited Intel's plant in Arizona in March to present the preliminary agreement. The investments, according to the government, would create 3,000 jobs in manufacturing and 7,000 in construction.
Intel's recent problems are linked to the massive losses resulting from its multi-year, multi-billion dollar investment program to expand its manufacturing capacity. These losses could not be offset by sales in the PC and server chip business or by new foundry customers.
In addition to the $8.5 billion subsidy, Intel could be provided with up to $11 billion in loans. In total, Intel has pledged to invest more than $100 billion in expanding its production capacities in the USA, particularly in the states of Ohio, New Mexico, Arizona, and Oregon.
Amid these negotiations, however, Intel also experienced some positive developments. Earlier this month, the company announced that it will develop an AI chip in collaboration with Amazon based on its latest and most advanced “18A” manufacturing technology. This is part of a “multi-year and multi-billion dollar” framework agreement, in which both companies will invest in the development of custom chip designs.
