Intel’s CHIPS Act funding reduced from $8.5 billion to $7.85 billion because of recent military contract

The Biden administration has reduced Intel’s funding under the CHIPS Act from $8.5 billion to $7.85 billion, a significant cut attributed to the company’s recent $3 billion military contract.  

Intel, the largest recipient of CHIPS Act funding, faces mounting scrutiny over its ability to deliver on its commitments, particularly as it navigates financial struggles and extended project timelines.

Delays and financial strains raise concerns

Intel recently posted its largest quarterly loss in history, following the announcement of 15,000 people being laid off earlier this year. Additionally, reports surfaced that some of Intel’s planned plant openings may not meet the government’s 2030 deadlines. While the Commerce Department has maintained that the funding reduction is unrelated to these delays, the company’s financial difficulties have reportedly raised concerns among officials about its role as a cornerstone of the CHIPS Act initiative.

Intel has committed to investing $90 billion in US manufacturing by the end of the decade, a revision from its earlier goal of $100 billion in five years. The company plans projects in Arizona, Oregon, Ohio, and New Mexico, with each state receiving significant investment. However, Intel’s funding agreements include restrictions, such as retaining majority ownership in its manufacturing subsidiary, Intel Foundry, to ensure continued eligibility for subsidies.

CHIPS Act faces political challenges

The CHIPS Act, a landmark initiative of the outgoing administration, is designed to bolster US semiconductor manufacturing, create over 125,000 jobs, and reduce reliance on foreign chip makers. While President-elect Trump criticised the act during his campaign, analysts believe the legislation will likely survive, despite some Republican opposition. House Speaker Mike Johnson initially suggested the act might be repealed but later softened his stance.

With a new administration set to take office in January, the Commerce Department has been working to finalise awards quickly. Earlier this month, Taiwan Semiconductor Manufacturing Company (TSMC) became the first to secure a grant, receiving $6.6 billion for three plants in Arizona. These facilities are projected to create tens of thousands of jobs by 2030.

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Strategic tensions highlight semiconductor importance

Intel remains the only US-based logic chip manufacturer, a factor that has led US Secretary of Commerce Gina Raimondo to encourage collaboration between Intel and tech giants like Apple, NVIDIA, and AMD. However, many companies have reportedly resisted due to concerns over Intel’s lagging manufacturing technologies compared to TSMC.

The Biden administration’s push for domestic semiconductor production stems partly from geopolitical concerns. Taiwan, home to TSMC, remains under threat from China, which has conducted military exercises near the island. As tensions rise, US reliance on Taiwanese chips is seen as increasingly risky, underscoring the urgency of the CHIPS Act’s goals to secure a robust domestic semiconductor industry.