The US government intends to lower Intel Corp’s preliminary $8.5 billion federal chips grant to under $8 billion, according to a report by the New York Times on Sunday, citing anonymous sources. The reduction takes into account a $3 billion contract Intel received to manufacture chips for the Pentagon, the sources said. The original grant, which Intel was expected to claim next year, was supported by up to $11 billion in loans from the Commerce Department, along with a tax credit from the Treasury Department that could cover up to 25% of capital investments.
The grant was part of the 2022 CHIPS Act, a bid to boost domestic chip production by giving companies direct funding for a new factory or the modernization of an existing one. The grants are intended to accelerate America’s “smart, innovative economy” by allowing the country to produce enough of the world’s most advanced semiconductors, which are used in artificial intelligence, smartphones, supercomputers, and sensitive military hardware.
In the case of the $8.5 billion grant for Intel, the money was supposed to fund two new facilities and help modernize an existing facility. The company has also said it will use the funds to help train workers in Arizona, Rio Rancho, N.M., and Hillsboro, Ore. Intel chief executive Pat Gelsinger described the federal grant as a “proud moment” for his company, which is trying to halt years of decline in revenue and shifting investment away from the United States to Asia.
However, critics say the shift undermines the law’s goal of boosting American innovation by redirecting funds from a competitive public selection process to a classified project that benefits only one company. The changes raise concerns that a taxpayer-funded law meant to boost a new generation of Americans’ skills and know-how in a critical industry is becoming a fixture for big business players and excluding small or midsize technology firms from the process.
The redirected grants have angered many lawmakers who were part of the CHIPS Act legislation, including Commerce Chairwoman Maria Cantwell and her fellow Democratic member of the Senate Armed Services Committee, Senator Jack Reed. The lawmakers have urged Commerce to steer clear of the Secure Enclave initiative and instead focus on other projects that can be awarded through the CHIPS Act. However, they have yet to find a way to restore the $3 billion in funds, which were initially directed from proceeds from spectrum auctions. Those revenues were slated to support a variety of other chip manufacturing initiatives.
In the meantime, the Commerce Department has clarified that it will award more grants to chipmakers making a more significant commitment to their own research and development programs. The department has already announced grants of up to $10 billion to three other chipmakers: TSMC, Microchip Technology, and BAE Systems. This spring, the administration will announce more grants. The administration hopes to bolster the domestic market for the advanced semiconductors that are the building blocks of the Internet, mobile devices, and artificial intelligence as it attempts to reverse a growing perception among voters that the United States needs to catch up in innovation.
