According to sources cited by the media on Friday (September 13), chip manufacturer Intel has reached a binding agreement with US officials, stating that the company is officially eligible for up to $3.5 billion in federal funding to produce semiconductors for the Pentagon.
The project is called "Secure Enclave" and produces advanced chips for military and intelligence agencies. According to reports, the project will involve multiple states in the United States, including Intel's manufacturing plant in Arizona.
The above-mentioned insiders also pointed out that this funding may be announced as early as next week.
Appropriations for the Chip Act
According to reports, the funding for the "Secure Enclave" project comes from the Chip and Science Act (hereinafter referred to as the "Chip Act") grant project managed by the US Department of Commerce.
As soon as the project was reported, Intel's stock price began to rise during the late trading session on Friday, closing up 1.55% to $19.66 on the same day. As of Friday's close, the stock has fallen 61% so far this year.
In March of this year, according to the Chip Act signed by President Biden, the US Department of Commerce announced that the government had decided to provide Intel with $8.5 billion in funding and $11 billion in loans. The bill aims to revitalize the semiconductor manufacturing industry in the United States.
Intel is negotiating with the government on the terms of a broader incentive plan, hoping to expand government support to factories in Arizona, Ohio, New Mexico, and Oregon.
Like other beneficiaries of the Chip Act, Intel has not yet received any incentive funds as these funding decisions are considered preliminary. Previously, there were reports that due to Intel's severe decline in performance, the company may not be able to smoothly obtain the aforementioned subsidies from the US government.
Intel's troubles
From Intel's own perspective, the company has indeed encountered difficulties this year. Last month, Intel released a disappointing performance report and revenue forecast that caused a sharp drop in its stock price and shattered confidence in CEO Pat Gelsinger's ambitious transformation plan.
Since Gelsinger took over Intel, the company has been betting on its future in contract manufacturing, attempting to enhance its ability to manufacture the most advanced chips for its own and other companies at its contract factories in the United States.
Now, this chip manufacturer is actively reassessing its manufacturing strategy. Earlier, informed sources stated that Intel may delay or halt semiconductor manufacturing plant (Fab) projects outside the United States.
This time, its "safe haven" agreement with the US military suggests that Intel may be taking a different approach. And the US government also believes that Intel will take on this order.
For chip manufacturers, the Pentagon is often a difficult customer to deal with. A recent report from the National Academy of Sciences, Academy of Engineering, and Academy of Medicine in the United States found that companies involved in previous Pentagon projects often struggle to meet the requirements of the Department of Defense and receive investment returns from these orders.
In addition, this transaction actually reflects the Biden administration's lack of other options: Pentagon officials insist on purchasing cutting-edge semiconductors from an American company, and Intel is the only advanced processor manufacturer in the United States. Other manufacturers, including TSMC and Samsung Electronics, are both building factories in the United States under the support of the Chip Act, but neither is a US company.