Intel-Commerce Deal Includes Nearly $20 Billion in Funding Under CHIPS Act

On March 20, American semiconductor developer Intel Corporation and the U.S. Department of Commerce jointly announced that the chip giant had entered into a preliminary memorandum of terms (PMT) that could make Intel eligible for nearly $45 billion in federal investments into chip production facilities and workforce development. At least $19.5 billion of this funding comes from money appropriated under the CHIPS and Science Act, making Intel an early beneficiary of the landmark legislative package enacted in 2022 to establish U.S. dominance in chip production.

Federal Funding to Support Facility Modernization and More Than 20,000 Jobs

This federal funding package is nearly half the $100 billion that Intel has pledged to invest in several chip production facilities across America under the PMT. Much of this investment will focus on Intel’s foundry operations in the western United States. In Chandler, AZ, Intel will embark on two new factory construction projects and modernize existing chip fabrication facilities, enabling production of the first Intel 18A process products that the company expects will help it regain process leadership by 2025. Federal funding will also drive modernization efforts in Rio Rancho, NM, and Hillsboro, OR, to improve Intel’s packaging and lithography operations. Intel is also committing to building two foundry-capacity chip production facilities in New Albany, OH, that are expected to anchor a regional chipmaking ecosystem in Ohio.

In total, the federal investments are expected to support the creation of more than 20,000 jobs in construction and manufacturing in the regions standing to benefit from these appropriations. The recent announcement also indicates that federal funding will be used to establish semiconductor workforce training programs, including a program at Maricopa County Community College that will train students for entry level technician careers.

Of the nearly $45 billion funding package earmarked for Intel, $8.5 billion in direct funding comes from the CHIPS and Science Act passed into law in August 2022. In total, this bill appropriated $280 billion in taxpayer funds to both bolster computer chip production across the United States as well as support research & development (R&D) projects in critical tech sectors like quantum computing and artificial intelligence. Intel’s PMT with the Biden Administration also qualifies the chipmaker for up to $11 billion in loans from the $75 billion in appropriations under the CHIPS and Science Act that is authorized for federal lending.

Federal Appropriations Expanded in Legislative Draft to Better Compete with China

In its first version, introduced into Congress in 2020, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act originally provided more than $60 billion to support factory construction and workforce development in America’s semiconductor industry. After a legislative overhaul, which featured major additions to the bill advanced by U.S. Senator Chuck Schumer (D-NY), lawmakers advanced the revamped CHIPS and Science Act to President Joe Biden with the aim of restoring domestic manufacturing in critical tech sectors to better compete with foreign economic rival, China.

The vast majority of the remaining $25 billion in federal funds available to Intel under the PMT, as acknowledged by the Commerce Department’s press release, is a 25% tax credit offered through the U.S. Department of the Treasury on Intel’s $100 billion in capital expenditures. According to the figures offered by press releases from both Intel and the Commerce Department, Intel’s total $75 billion in capital expenditures, following the Treasury Department’s tax credit, is met with more than half that total in federal funding appropriations under the recently announced PMT. IPWatchdog has reached out with questions on these figures to the Commerce Department but had not received a response as of the time of publication.

This appears to be the U.S. government’s first non-binding PMT offered to companies qualifying for CHIPS and Science Act funding who have applied for the first Notice of Funding Opportunity (NOFO) administered by the National Institute of Standards and Technology (NIST). According to the U.S. Commerce Department, it has received more than 620 statements of interest as well as 170 applications, both pre-applications and full submissions, for the Commerce Department’s first NOFO. Applications applying for this first NOFO round are offered a non-binding PMT upon the Department’s review on the merits of a full application. A second NOFO is currently underway and has already led to 160 small supplier concept plans eligible for CHIPS and Science Act funding.

Anyone following the progress of the CHIPS and Science Act through Congress will be little surprised that Intel is among the first beneficiaries of federal funding under this new law. Intel CEO Pat Gelsinger was among the attendees at President Joe Biden’s signing of the CHIPS and Science Act into law in August 2022. A statement from Gelsinger at that time indicated that Intel was looking forward to working with the Commerce Department on implementing the law, which includes large amounts of funding to attract U.S. investment from major semiconductor firms while paying short shrift to intellectual property and tech transfer matters that are barely referenced by the bill’s language.

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Author: wolterke
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