In a concerted effort to bolster domestic semiconductor production, the Biden administration is engaged in discussions to allocate over $10 billion in subsidies to Intel Corp, a move motivated by the industry’s escalating significance in powering critical technologies across various sectors.
This development, reported by Bloomberg News on Friday, reflects a strategic maneuver aimed at fortifying the United States’ semiconductor capabilities amidst global supply chain disruptions and geopolitical tensions.
Sources familiar with the matter revealed that negotiations are ongoing, with Intel’s award package expected to encompass both loans and direct grants, aimed at revitalizing and expanding the American semiconductor industry.
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The US Department of Commerce, entrusted with overseeing the disbursement of funds under the CHIPS Act, has refrained from confirming or denying the reports, maintaining a diplomatic silence amidst the sensitive negotiations. Similarly, Intel has opted to withhold comment on the ongoing developments.
The proposed subsidy to Intel aligns with broader initiatives outlined by the Biden administration to bolster the semiconductor sector, which plays a pivotal role in driving technological innovation, economic growth, and national security. Under the auspices of the $39 billion semiconductor program, the Department of Commerce has already unveiled two smaller grants, signaling a concerted effort to invigorate semiconductor manufacturing capabilities within the country.
Commerce Secretary Gina Raimondo’s earlier announcement regarding the imminent allocation of several funding awards denotes the urgency and commitment of the US government to strengthening domestic semiconductor production.
The semiconductor fund, a cornerstone of the government’s strategy, seeks to catalyze chip production and related supply chain investments, with a particular focus on building new factories and enhancing production capacities.
Intel, a stalwart in the semiconductor industry, has outlined ambitious plans to invest tens of billions of dollars in chip factories across various states, with a notable emphasis on a groundbreaking new site in Ohio, potentially positioned to become the world’s largest chip plant. However, recent reports hint at a potential delay in the completion of the Ohio facility until 2026, citing market dynamics and the gradual influx of federal funding as contributing factors.
Amidst the discussions surrounding federal subsidies, Nvidia has emerged as a key player in the semiconductor industry, reaching a market cap of $1.79 trillion. The California-based company has experienced significant growth and prominence in recent years, driven by its cutting-edge graphics processing units (GPUs) and contributions to artificial intelligence, high-performance computing, and data center technologies.
Further under the CHIPS Act, GlobalFoundries, a pivotal domestic semiconductor manufacturer, is poised to receive a substantial portion of the federal subsidy, as outlined in a preliminary agreement. The funding is earmarked for three projects, including the establishment of a new fabrication facility in Malta, New York, and expansions at existing sites in Malta and Burlington, Vermont.
Lael Brainard, director of the White House’s National Economic Council, emphasized the strategic importance of such investments in bolstering national security and technological prowess, noting the multifaceted significance of semiconductor investments in driving economic resilience and innovation.
“Today’s investment will protect our national security by expanding domestic production of chips used in technology such as satellites and space communications,” Brainard said on a call with reporters.
Senate Majority Leader Chuck Schumer hailed the announcement as a significant milestone for New York State, highlighting the anticipated job creation and economic benefits.
The projects are expected to create thousands of manufacturing and construction jobs over the next decade, contributing to the revitalization of local economies.
As semiconductor manufacturers gear up for a rebound in the industry, GlobalFoundries’ strategic upgrades underscore the anticipation of a future growth trajectory, further corroborated by projections indicating a double-digit growth in semiconductor sales for 2024.
While the negotiations surrounding Intel’s potential subsidy mark a significant step in strengthening domestic semiconductor production, the broader implications extend to reinforcing supply chain resilience, mitigating geopolitical risks, and fostering technological innovation.
The Chips Act was passed by Congress in 2022. The initiative responds to concerns regarding global supply chain vulnerabilities, production expenses, and geopolitical risks, particularly those related to Taiwan. Concurrently, tensions between the United States and China over technology are escalating as the 2024 presidential election approaches.
With ongoing discussions and investments, the semiconductor industry is poised to play a pivotal role in driving economic growth and innovation in the United States. The main goal of Washington is to boost domestic production, covering the edges that China could leverage to beat its sanctions. Analysts expect more companies like Nvidia to emerge in the industry in the near term.