Intel awarded $8.5 billion in CHIPS Act grants
The U.S. is awarding Intel with $8.5 billion in direct funding through the federal CHIPS Act to support the company’s semiconductor advanced packaging and manufacturing facilities in Arizona and three other states.
Once loans and tax credits are considered, Intel (Nasdaq: INTC) could receive a package valued at more than $40 billion.
The U.S. Department of Commerce said March 20 it inked a nonbinding preliminary agreement with Intel for a CHIPS Act award package that consists of $8.5 billion in grants and $11 billion in loans. The company also plans to claim the Department of the Treasury’s Investment Tax Credit of up to 25% on its $100 billion in qualified investments, according to a draft announcement.
All told, Intel’s federal award package could support 30,000 new direct jobs, including 3,000 manufacturing and 6,000 construction jobs in Arizona.
“Today is a defining moment for the U.S. and Intel as we work to power the next great chapter of American semiconductor manufacturing innovation,” Pat Gelsinger, Intel’s CEO, said in a statement. “AI is supercharging the digital revolution and everything digital needs semiconductors. CHIPS Act support will help to ensure that Intel and the U.S. stay at the forefront of the AI era as we build a resilient and sustainable semiconductor supply chain to power our nation’s future.”
Intel’s award package marks the largest CHIPS Act funding announcement to date, U.S. Secretary of Commerce Gina Raimondo told reporters on a March 19 teleconference call. The California-based company employed 124,800 people worldwide as of Dec. 30, 2023, according to its latest annual report. It had a market cap approaching $178 billion as of March 19.
“Last month, I set an aggressive goal for the CHIPS program that America would produce roughly 20% of the world’s leading-edge chips by the end of the decade,” Raimondo said. “To remind everyone, we’re at 0% today and we believe we’re going to get to 20% by 2030. And this announcement is going put us on track to meet that goal.”
Intel is allocating an unspecified portion of its CHIPS Act funding toward modernizing a fab and supporting construction of two new fabs totaling $20 billion at its Ocotillo campus in Chandler, where it will ramp up production of Intel 18A, its most advanced semiconductor process node technology.
Intel will produce its first 18A Xeon processors — called Clearwater Forest — at its Arizona fabs.
While Intel has not publicly specified an opening date for its new Ocotillo fabs, Department of Commerce officials told reporters on the teleconference call that the first of the company’s two fabs could be up and running by the end of 2024. That’s an update from April 2023, when an Intel spokesperson declined to say whether the company was on track to open fabs this year.
Intel investments in U.S. to exceed $100 billion as it expands fab capacity
Over the next five years, Intel expects its investments in the U.S. to exceed $100 billion as it expands fab capacity and capabilities in Arizona, New Mexico, Ohio, and Oregon.
Intel is building out its Silicon Heartland semiconductor manufacturing site near Columbus, Ohio. Intel is investing $28 billion in the project, which is slated to finish construction between 2026 and 2027 and become operational between 2027 and 2028.
The company in January opened a $3.5 billion fab in Rio Rancho, New Mexico, where the company will mass produce its 3D advanced packaging technology. Intel’s CHIPS Act award will also support expansion and modernization of its facilities in Hillsboro, Oregon, where it will utilize the world’s first high NA EUV lithography equipment, according to a Department of Commerce news release.
The timeline for Intel’s job creation at its fabs will vary, a senior Department of Commerce official told reporters.
Intel’s CHIPS Act award includes $50 million earmarked for developing its semiconductor and construction workforce. Those funds will build upon the company’s existing investments that total more than $250 million in the past five years, along with its partnerships with universities, community colleges and apprenticeship programs.
As part of its broader workforce investment program, Intel has committed to providing discounted access to a network of child care providers and a primary child care reimbursement program for non-exempt employees.
Intel’s 18A and advanced packaging technologies, combined with its foundry services, will enable U.S. companies to lead the artificial intelligence industry by ensuring a domestic supply of advanced chips, according to the Department of Commerce.
“The CHIPS for America program will bring semiconductor manufacturing back to the U.S. and create a vital R&D ecosystem to keep it here,” Laurie E. Locascio, under secretary of commerce for standards and technology and NIST director, said in a statement. “The innovation sparked by this proposed investment would strengthen America’s technological and research leadership and significantly help enhance our nation’s manufacturing capacity while strengthening communities and creating good-paying jobs.”
The Department of Commerce declined to disclose specific funding allocations for each of Intel’s fabs in Arizona, Oregon, Ohio and New Mexico. Intel’s CHIPS Act award is subject to due diligence and negotiation of a long-form term sheet. In addition, the award is conditional upon achievement of certain milestones, which will be refined in the future, according to a Department of Commerce official.
More CHIPS Act announcements in the pipeline
Advanced semiconductor companies — including Intel and TSMC — have requested more than $70 billion in CHIPS Act subsidies, more than double the amount available for U.S.-based projects, Raimondo said Feb. 26.
The CHIPS Act includes $39 billion in grants, as well as loans and loan guarantees worth $75 billion to spur semiconductor manufacturing in the U.S., according to the Department of Commerce.
In addition to Intel, the Department of Commerce has announced three CHIPS Act investments for BAE Systems Inc., Arizona-based Microchip Technology and GlobalFoundries, which is set to receive nearly $1.5 billion in federal subsidies for a new fab and modernization of its existing facilities in New York and Vermont.
More award announcements are expected to follow in the coming weeks, according to the Department of Commerce.
“We have more to come. We’re just getting rolling,” Raimondo said of the CHIPS Act funding announcements. “But this is a huge investment in America’s championship company Intel and we’re committed to their success.”