The funds were already allocated under the CHIPS Act and Secure Enclave program
Congratulations America, your government now owns 10 percent of troubled domestic chipmaker Intel.
Intel and the government announced the deal late on Friday. Under it, Intel will get $5.7 billion in grants that officials had allocated but not yet paid under former President Biden's CHIPS and Science Act. The government gave Chipzilla an additional $3.2 billion under the Secure Enclave program, which is supposed to be used to develop high-security chips for US government and military use. Intel has already received $2.2 billion in CHIPS grants so far, giving it quite the war chest.
"It is my Great Honor to report that the United States of America now fully owns and controls 10% of Intel, a Great American Company that has an even more incredible future," President Trump announced on his social media site Truth Social.
"I negotiated this Deal with Lip-Bu Tan, the Highly Respected Chief Executive Officer of the Company. The United States paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars. This is a great Deal for America and, also, a great Deal for Intel."
Indeed, Intel's shares closed the day up more than 5%, giving the company a market cap of nearly $110 billion, which would make the US government's stake worth about $11 billion. That said, the government did not pay nothing for the shares, although it used money that had already been allocated under previous programs, so no new money was spent.
Intel has been desperately trying to drum up more funding as it seeks to regain its position as one of the top chipmakers in the world. The cash will give it a much-needed lifeline to rebuild its advanced chip-making capabilities and move production stateside and away from Asian vendors like TSMC.
The deal also represents a personal win for the relatively new CEO, who took over in March. At the start of the month, the president was calling for Tan's resignation as he was "highly CONFLICTED," but after some frantic diplomacy he's now back in the government's good books it seems.
"As the only semiconductor company that does leading-edge logic R&D and manufacturing in the US, Intel is deeply committed to ensuring the world's most advanced technologies are American made," said Tan in a statement.
"President Trump's focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country's economic and national security. We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance US technology and manufacturing leadership."
In addition to taking a 10 percent stake, the government reserves the right to buy an additional 5 percent of the company at $20 per share, a considerable discount on the current stock market price of around $25. The government won't have a seat on the board, and has said it will back the current management with "limited exceptions."
"Intel is excited to welcome the United States of America as a shareholder, helping to create the most advanced chips in the world," said the United States Secretary of Commerce Howard Lutnick. "As more companies look to invest in America, this administration remains committed to reinforcing our country's dominance in artificial intelligence while strengthening our national security."
Rumors about the investment have circulated for a while and, on the face of it, looks like a very good deal for American taxpayers. For decades Intel has spent tens of billions propping up its share price with stock buybacks and returns to investors, while failing to get to grips with advanced chip design and manufacturing.
Under the circumstances just handing them money with nothing to show for it would look like a dumb move. Now the US has a direct stake in a domestic chip company that could prove both lucrative, and also is necessary to ensure the US gets its chips from a friendly supplier in the homeland. ®