$8 Billion Boost: Intel Set to Secure Massive CHIPS Act Funding

Intel (INTC), the U.S.-based chipmaker, is on the verge of securing approximately an $8 billion grant from the CHIPS Act Office, according to sources cited by CNBC. This funding is part of the Biden administration’s push to distribute allocated funds before President-elect Trump’s inauguration, aimed at bolstering domestic semiconductor manufacturing. The money would support Intel’s extensive factory-building projects across the United States.

However, there have been complications. Initially, the grant was set at a higher amount, but recent reports from The New York Times suggest the government might reduce this by around $500 million due to concerns over Intel’s capability to fulfill its investment promises and shifts in its technology strategy and market demand. Despite these setbacks, Intel has already secured a $3 billion contract from the Department of Defense to manufacture chips, highlighting a positive aspect amidst broader challenges.

Intel’s CEO, Pat Gelsinger, has expressed frustration over the slow pace of the grant process, describing it as overly bureaucratic, as reported by CNBC in October. This delay comes at a challenging time for Intel, which has seen a significant downturn, reporting a near $17 billion loss in its last quarter. In response, Intel has been scaling back its global ambitions, including cutting 15,000 jobs and reevaluating its business structure to separate its foundry operations more clearly from its legacy business.

Moreover, Intel is looking into strategic financial maneuvers, such as selling a minority stake in its Altera programmable chip unit to raise capital. There’s also speculation about Intel’s vulnerability to a takeover, with Qualcomm (QCOM), now boasting a larger market cap – $174B vs. Intel’s $106B – potentially in the position to make a bid—an eventuality that was once considered unthinkable.

The CHIPS Act has been celebrated for its potential to create jobs and revitalize U.S. manufacturing capabilities. However, with political changes on the horizon, including comments from U.S. House Speaker Mike Johnson about possibly repealing the Act (though later retracted), the future of such funding and its impact on companies like Intel remains uncertain. Meanwhile, competitors like Taiwan Semiconductor Manufacturing Company have already received substantial grants, setting a precedent for Intel’s expected funding.

Intel’s current situation underscores the complexities of navigating industry downturns, strategic pivots, and governmental support in the highly competitive and capital-intensive semiconductor sector.

Price Action: As of press time, INTC is changing hands at $25.05, up 2.24% intraday. The ticker is down 50.34% year-to-date and 43.39% year-over-year, as per data provided by MW.

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