The United States will issue a $20 billion grant to Intel trying to safeguard chip production on the national territory.
American chipmaker Intel will receive up to $20 billion in grants from the US Department of Commerce, the White House said on Wednesday. The grant will be used for the construction of semiconductor factories, traditionally dubbed “fabs” inside the US territory.
Intel is one of the US’s leading chipmaking companies. It powers most of the world’s personal computers and digital devices. However, it lost ground in recent years to rival Nvidia and AMD.
Nvidia is currently the leading company in AI chip manufacturing, controlling almost 85% of the market. Though Nvidia does not disclose its prices publicly, its chips are believed to be sold for up to $30,000. Nvidia’s clients include Meta, Alphabet, and OpenAI.
However, Nvidia and AMD outsource the production of their semiconductors. 92% of the world’s cutting-edge chips are produced by Taiwan Semiconductor Manufacturing Company (TSMC).
Taiwan, however, is currently in the crossfire of the world’s most dangerous geopolitical crisis. China claims the island as its de jure territory and threatened reunification with increasing levels of violence in the past decade. Seeking military protection, Taiwan is a close ally of the United States.
If China invaded Taiwan, the global semiconductor industry would virtually cease its operations. Semiconductors are also crucial components in modern military equipment.
Nearshoring chip manufacturing
By opening cutting-edge fabs in the United States, Biden wishes to safeguard the domestic semiconductor industry. The White House approved in 2021 the CHIPS Act, issuing up to $53 billion in public grants to build fabs on the national territory.
So far, Intel is the only major chipmaker that partially manufactures its semiconductors in the US, making it a natural target for the CHIPS Act grants.
The $20 billion will be used to build new fabs in Arizona, adding an estimated 10,000 jobs. Ohio, New Mexico, and Oregon will also receive new semiconductor production lines, adding a total of 30,000 jobs. Arizona and Ohio are swing states for the US elections.
US Commerce Secretary Gina Raimondo said its goal is to produce 20% of the world’s cutting-edge microchips by 2030. “And this announcement is going to put us on track to meet that goal,” Raimondo said.
The $20 billion deal will be divided into an $8.5 billion grant and up to $11 billion in loans. The agreement is currently non-binding and still open to negotiations.
Intel will be the biggest receiver of the CHIPS Act, with Apple and AMD also receiving grants for the construction of new fabs in Arizona.
