On Wednesday, the Biden administration awarded Intel (INTC.O) about $20 billion in grants and loans, boosting the company's domestic semiconductor chip output and marking the government's greatest subsidy for cutting-edge chip production.
Intel in Arizona will receive $8.5 billion in subsidies and up to $11 billion in loans to develop two new plants and upgrade one. Biden will announce the tentative agreement. A "huge deal" and one of the greatest semiconductor manufacturing investments in U.S. history, Commerce Secretary Gina Raimondo said.
"It means leading-edge semiconductors made in the United States of America," she said Tuesday, stressing that the country's share of leading-edge chip production is zero but may climb to 20% by 2030 owing to the subsidy scheme.
Since the Semiconductor Industry Association reports that the U.S. had 37% of global semiconductor production capacity in 1990 and 12% in 2020, the goal is to lessen reliance on China and Taiwan. The trip to Arizona, a key political swing state that Biden narrowly won in 2020, was first reported by Reuters. Biden seeks to defeat Republican former President Donald Trump in November.
In the 2022 CHIPS and Science Act, the Biden administration is betting big on Intel with $52.7 billion in funding, including $39 billion in semiconductor production subsidies and $11 billion for research and development.
Despite receiving over $70 billion in requests, Commerce is allocating $28 billion for government subsidies for chip manufacturing and has $75 billion in financing authority. The Arizona announcement may also help Democrats win a crucial U.S. Senate seat and two tough House of Representative races in November. Biden's 2020 campaign flipped Arizona for the first time in six presidential elections, but his allies think a repeat victory is unlikely.
It is also good news for Intel, which in January predicted first-quarter sales could miss market projections by more than $2 billion due to uncertain demand for its server and PC chips. GlobalFoundries (GFS.O), the world's third-largest contract chipmaker, received $1.5 billion from the Biden administration last month to establish a semiconductor production facility in Malta, New York, and expand operations in Burlington, Vermont.
The funds will also fund Intel's delayed leading-edge factory construction project in Ohio, a virtually complete advanced packaging facility in New Mexico, and an Oregon research and development center. Officials would not disclose project funding. In addition to the money revealed on Wednesday, Intel may receive $3.5 billion from the Commerce Department to improve security at its Arizona sites that make sensitive military processors.
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