Biden administration slashes Intel’s AI chips grant to under $8B

The Biden administration has decided to cut Intel’s much-anticipated CHIPS Act grant from $8.5 billion to less than $8 billion. The reduction follows a series of delays in Intel’s investments amid other struggles within the company.

Reports say the funding cut was influenced by Intel’s $3 billion contract to produce chips for the U.S. military. Despite being offered this lucrative defense deal, Intel’s performance issues and delayed timelines for critical projects in Ohio raised red flags.

Intel had originally committed to finishing its Ohio facilities by 2025 but has now pushed the completion date to the end of the decade.

Intel’s delays ruin Biden’s chipmaking plans

Intel’s troubles have cast a shadow over the Biden administration’s efforts to revive domestic semiconductor manufacturing. The administration made a big splash when it unveiled the CHIPS Act in 2022, allocating $39 billion to boost U.S.-based chip production and reduce dependency on Asian suppliers. 

Intel, a cornerstone of the plan, aggressively lobbied for the legislation and was rewarded with huge grants, tax credits, and federal loans. The delays in Intel’s projects, however, have disrupted the administration’s ambitious timeline.

Joe Biden himself traveled to Arizona earlier this year to celebrate Intel’s initial award, calling it a game-changer for America’s semiconductor industry. But Intel’s inability to stick to its own construction deadlines has undermined that narrative.

Intel has been struggling to remain competitive in a global semiconductor race dominated by Taiwan Semiconductor Manufacturing Company (TSMC).

While TSMC recently secured a $6.6 billion CHIPS Act grant and is pouring over $65 billion into its Arizona factories, Intel is grappling with its worst quarterly loss in decades. The company’s market value has plummeted to $106 billion, down from its $500 billion peak in 2000.

The funding cut is a blow, but it’s not Intel’s only problem. The company’s recent financial report showed a 6% drop in sales and ongoing efforts to cut 15,000 jobs. Pat Gelsinger, Intel’s CEO, had positioned the company as a key player in America’s tech resurgence.

He personally met with more than 100 lawmakers to push for the CHIPS Act, even attending a State of the Union Address as President Biden’s guest. Now, Intel is facing growing doubts about its ability to execute its ambitious plans.

Commerce Department officials tied Intel’s funding to clear milestones, including completing factory construction, producing chips, and securing customers for U.S.-made semiconductors.

Intel’s repeated delays and lack of clear customer commitments have made the government rethink how much of the $39 billion pot should go to the company.

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