Intel receives $8.5 billion in subsidies for building chip factories

President Biden plans to announce Wednesday that his administration will award up to $8.5 billion in subsidies to Intel, a major investment to boost the country’s semiconductor manufacturing, during a tour of battleground states aimed at advancing his economic agenda to sell.

Mr. Biden will make the announcement during a visit to the Intel campus in the Phoenix suburb of Chandler, Arizona, White House officials said. The award, which will go toward building and expanding Intel facilities in the United States, is the largest given by the federal government with funding from the CHIPS Act, which lawmakers passed in 2022 to help restore the United States as a leader . in semiconductor production.

The Biden administration, which has $39 billion in subsidies to distribute, is leading an ambitious effort to ramp up production of the tiny chips that power everything from smartphones to computers and cars. The effort is central to Mr. Biden’s goal of reducing America’s dependence on foreign countries: Although semiconductors were invented in the United States, only about 10 percent of the world’s chips are made domestically.

In addition to the grants, the federal government plans to grant Intel up to $11 billion in loans on what the company described as generous terms. Intel is also expected to claim federal tax credits that could cover 25 percent of the costs of its U.S. expansion projects, which are expected to cost more than $100 billion over five years.

The grants are intended to finance the company’s construction plans in Arizona, Ohio, New Mexico and Oregon. The projects are expected to create more than 10,000 manufacturing jobs and about 20,000 construction jobs, according to Biden administration officials.

In Arizona, the money will help finance Intel’s recent construction of two advanced factories and the modernization of another factory. The funds will also help establish a brand new location near Columbus, Ohio, starting with two factories, the company’s first move into a new U.S. region in more than 40 years.

In Rio Rancho, NM, Intel will use the federal funds to convert two factories into advanced packaging facilities, where chips are assembled to improve performance and reduce costs. The company will also expand and modernize an innovation center in Hillsboro, Oregon, which is expected to advance the company’s technology leadership and development of new innovations.

Gina Raimondo, the Commerce Secretary, whose department oversees the distribution of the subsidies, said the award would support production of the country’s most advanced semiconductors, used in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware , would help boost. . The United States currently produces none.

“We rely on a very small number of factories in Asia for all our most advanced chips,” Ms. Raimondo said on a call with reporters. “That is untenable and unacceptable. It is an economic security problem, a national security problem, and we are going to change that.”

Ms. Raimondo said the Intel award would be the largest subsidy to a chipmaker under the new program. The investment will also help the United States produce about 20 percent of the world’s most advanced chips by the end of this decade, she said.

Mr. Biden and his Democratic allies see the semiconductor investments as an important way to try to change perceptions of the economy among voters in battleground states like Arizona.

“We haven’t talked to people about the issues that President Biden has addressed, and that’s what we’re committed to doing,” Yolanda Bejarano, chairwoman of the Arizona Democratic Party, said Tuesday, adding that Democrats should talk more . about the effects of semiconductor investments.

While Intel will have to meet certain milestones before the money is distributed, senior Biden administration officials said they expected the money to start flowing to the company by the end of this year.

Intel CEO Patrick Gelsinger told reporters in a briefing Tuesday evening that the government stimulus was a proud moment for his company and a major achievement for politicians of both parties. While he is pleased with the incentives earmarked for Intel, he says officials may need to invest more in the industry to reverse decades of shifting investment from the United States to countries in Asia.

“It won’t be solved in one three- to five-year program,” Mr. Gelsinger said. “I think we need at least a CHIPS 2 to do that job.”

Intel is the fourth company to receive a federal award under the new program, bringing the total number of announced grants to more than $10 billion. The first three grants – to GlobalFoundries, Microchip Technology and BAE Systems – were for makers of older chips, which were made with older manufacturing processes but are still used in many products such as cars and dishwashers.

Biden administration officials are expected to announce more prices in coming months for other major chip makers, including Taiwan Semiconductor Manufacturing Company, Samsung and Micron Technology. These companies have also made major investments in new or expanded semiconductor factories in the United States in recent years.

The United States’ dependence on Asia for its chips has become even more apparent with the rise of artificial intelligence; Nearly all the chips used to power the latest generative AI services were manufactured in Taiwan by TSMC, although designed by Silicon Valley company Nvidia.

Intel has tried to change that by developing new manufacturing technology, building chips designed by other companies and lobbying heavily for legislation. The investment in Intel is intended to give US companies a leading position in the AI ​​industry by ensuring a domestic supply of advanced chips.

About $50 million in federal funding will be set aside for Intel to spend on training and developing its workforce. Many semiconductor companies and industry groups have expressed concerns about possible shortages of technicians, engineers and other workers to fill all the positions that will be created once the facilities are built.

In total, private companies have announced more than $240 billion in investments in semiconductors and electronics since Biden took office, administration officials said. However, some chip makers have encountered obstacles in their efforts to expand their domestic production capacity, leading to delays.