By Stephen Nellis
Intel announced on Wednesday that its recent agreement to receive $7.86 billion in subsidies from the U.S. government comes with certain strings attached. The stipulations, part of securing these funds, limit Intel’s ability to offload portions of its chipmaking operations if they eventually spin out into their own entity.
This subsidy is a slice of the hefty $39 billion commitment the U.S. Commerce Department unveiled on Tuesday. The program aims to bolster domestic chip production, not only supporting Intel but also involving other big players like Taiwan Semiconductor Manufacturing Co among others.
Back in September, Intel’s CEO, Pat Gelsinger, revealed their intention to transform their chip manufacturing sector into a standalone subsidiary, potentially opening it up to external investment and branding it as Intel Foundry.
However, according to a recent securities filing from Intel, the government requires the company to retain at least a 50.1% stake in Intel Foundry if it transitions into a standalone privately held entity. If it morphs into a public company and Intel doesn’t hold the majority stake, Intel faces restrictions, unable to sell more than 35% of Intel Foundry to any one investor without triggering specific control change regulations.
For now, Intel hasn’t commented on these stipulations. Meanwhile, a spokesperson from the Commerce Department confirmed that negotiations about control change terms are underway with everyone who received direct grants.
Intel needs to navigate these conditions carefully. Keeping in line with these terms is crucial to advance their $90 billion projects scattered across Arizona, New Mexico, Ohio, and Oregon, all focused on maintaining cutting-edge chip production capabilities within the U.S. According to the filing, any major shifts in control could necessitate Intel to seek permission from the U.S. Department of Commerce.
(Reported by Stephen Nellis in San Francisco; Edited by Cynthia Osterman)
