Intel's Expansion Plans Bolstered by U.S. Government Support

Intel's expansion, backed by $280 billion CHIPS Act, faces delays, aiming for foundry business break-even by mid-next decade.

By Mackenzie Crow

4/3, 18:09 EDT
Intel Corporation

Key Takeaway

  • Intel plans to expand its foundry business with significant U.S. government support, including up to $8.5 billion in funding and $11 billion in loans.
  • The CHIPS Act's $280 billion allocation aids Intel's ambition, aiming to enhance U.S. semiconductor competitiveness and reduce foreign dependency.
  • Despite challenges and delays, notably in Ohio plant construction pushing operational start to 2027/28, Intel's expansion marks a strategic move towards domestic chip manufacturing self-sufficiency.

Intel's Ambitious Expansion

Intel, the U.S. chipmaker, is making headlines with its ambitious plans to compete in the global semiconductor market by expanding its foundry business. This move comes as Intel seeks to catch up in chip design and manufacturing, areas where it has lagged behind competitors. CEO Pat Gelsinger has been a vocal advocate for increasing domestic chip manufacturing, leveraging the pandemic-induced chip shortage to push for greater self-sufficiency in the U.S. semiconductor industry. The company's expansion plans have been significantly bolstered by the U.S. government's CHIPS Act, which allocates $280 billion to support domestic chip manufacturing. Intel's strategy includes a major investment in new factory projects across Arizona, New Mexico, Ohio, and Oregon, aiming to position the U.S. and Intel at the forefront of semiconductor innovation, particularly in the AI era.

Government Support and Subsidies

The Biden Administration has shown strong support for Intel's expansion efforts, with President Joe Biden and Commerce Secretary Gina Raimondo announcing substantial federal funding for the company. Intel is set to receive up to $8.5 billion in direct funding, along with up to $11 billion in low-cost loans for its projects in multiple states. Additionally, Intel anticipates benefiting from federal tax credits that could offset up to 25% of its estimated $100 billion U.S. expansion costs. This financial backing is part of the government's broader initiative under the CHIPS Act to enhance the U.S.'s competitiveness in advanced semiconductor manufacturing and reduce reliance on foreign chip production.

Challenges and Delays

Despite the optimistic outlook and significant government backing, Intel faces several challenges in realizing its foundry business ambitions. The company has disclosed that it does not expect its foundry business to break even until midway through the next decade, citing slackening demand for its server and PC chips as investment shifts towards AI. Additionally, Intel has announced delays in the construction of its Ohio plant due to "business conditions" and "market dynamics," pushing the operational start date to 2027 or 2028. These delays highlight the complexities and uncertainties in scaling up semiconductor manufacturing capabilities, even with substantial financial and political support.

Management Quotes

  • Pat Gelsinger, CEO of Intel:

    "American chip manufacturing doesn’t get fixed in one three- to five-year program... I do think we’ll need at least a CHIPS 2 to finish that job."