The Biden administration, in a push to enhance semiconductor production in the United States, has provisionally agreed to grant Intel (NASDAQ:INTC) up to $8.5 billion in funding through the CHIPS Act.
Moreover, the chip manufacturer might secure up to $11 billion in loans under the CHIPS and Science Act, enacted in 2022. The deal is set to be officially announced by President Joe Biden in Arizona on Wednesday.
INTC rose more than 4% in premarket trading Wednesday.
The move is aimed at fostering the domestic production of advanced semiconductors, a move the U.S. Commerce Secretary Gina Raimondo describes as crucial for keeping “America in the driver’s seat of innovation.”
"It means leading-edge semiconductors made in the United States of America," she stressed on Tuesday, highlighting that while the U.S. currently produces none of the world's leading-edge chips, the share could increase to 20% by 2030, partly due to the impact of the subsidy program.
Intel and the White House said their agreement is nonbinding and preliminary and could change.
The aim of the grant is to revitalize the U.S. semiconductor industry and reduce the country's dependence on China and Taiwan for chip manufacturing.
The global semiconductor production capacity in the U.S. has been on a downtrend, dropping from 37% in 1990 to just 12% in 2020.
With the Intel investment, the government seeks to reverse this trend, with the 2022 CHIPS and Science Act at the core of this strategy. The act provides $52.7 billion in funding to stimulate domestic semiconductor manufacturing, including $39 billion in production subsidies and $11 billion designated for research and development.
Meanwhile, the announcement in Arizona could bolster Democratic efforts to retain a crucial Senate seat and enhance their competitiveness in two House races come November.
Arizona, turned blue by Biden in 2020 for the first time in decades, represents a challenging but pivotal battleground for a repeat victory.
For Intel, the deal is just as big, particularly after its January warning of potential first-quarter revenue shortfalls exceeding $2 billion due to fluctuating demand in its core markets.
The funding will support Intel's projects in Arizona, a new factory in Ohio, an advanced packaging facility in New Mexico, and an R&D center in Oregon, though specific allocations were not disclosed.
Also, the company is set to $3.5 billion from the Commerce Department for enhancing security at its Arizona sites to produce sensitive military-grade chips.