After the chipmaker reached a binding agreement with U.S. authorities, Intel Corp. has officially qualified for as much as $3.5 billion in federal grants to provide semiconductors for the Pentagon, in accordance with people aware of the matter.
The secret program, called “Secure Enclave,” is designed to spice up production of sophisticated chips for military and intelligence applications. Bloomberg reported that this system spans several states and in addition has a production facility in Arizona.
Although Intel was all the time considered the favourite for the contract, there was resistance from other chipmakers, doubts in Washington concerning the wisdom of counting on a single company, and a dispute over funding raged in several agencies and on Capitol Hill that threatened to scale back Intel’s overall contract value.
The funding could possibly be announced as early as next week, said the people, who asked to not be identified since the talks are confidential. It can be along with the possible $8.5 billion in grants and $11 billion in loans that Intel was awarded in March under the Chips and Science Lawa law that President Joe Biden signed in 2022 to revive U.S. semiconductor manufacturing and reduce dependence on Asia.
Intel remains to be negotiating the terms of this broader incentive package, which can support facilities in Arizona, Ohio, New Mexico and Oregon. Like other Chips Act winners, Intel has not yet received any money, and its award is taken into account preliminary. Secure Enclave’s funding may even come from the Chips Act grant program, which is run by the Commerce Department — after a dispute arose earlier this yr over which agency needs to be in charge — but was handled outside the standard application process.
The Secret Service, the Commerce Department and the Pentagon declined to comment. The White House didn’t immediately reply to a request for comment.
Intel shares rose lower than 1 percent in late trading Friday after Bloomberg reported the deal. By the close, the stock had fallen 61 percent this yr to $19.66.
The Secure Enclave agreement shows that the U.S. government trusts Intel to perform the Pentagon’s plans, despite the corporate’s recent problems. Last month, Intel released a disastrous earnings report and revenue forecast that sent stock prices reeling and shook confidence in CEO Pat Gelsinger’s ambitious turnaround plan, which depends upon factory investments world wide.
Bloomberg reported that the chipmaker is actively reassessing its manufacturing ambitions. No final decisions have been made, but Intel is more prone to delay or halt projects outside the U.S. than its flagship sites in Arizona and Ohio, people aware of the matter previously said.
The deal also reflects the shortage of other options for the Biden administration: Pentagon officials have insisted on sourcing cutting-edge semiconductors from an American company, and Intel is the one U.S. maker of advanced processors. Other manufacturers include Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co., each of that are constructing factories on American soil with support from the Chips Act.
Bloomberg reported that there had already been initial discussions in Washington about purchasing chips from foreign manufacturers’ US production facilities. However, these were more general procurement guidelines and were independent of the Secure Enclave program.
It’s still unclear exactly which chip models Intel will produce for the Pentagon. The Santa Clara, California-based company, which operates each a design and manufacturing business, still relies on TSMC to make a few of its most advanced processors.
Intel has struggled to persuade potential customers comparable to Nvidia Corp. and Advanced Micro Devices Inc. of the facility of its products. Commerce Secretary Gina Raimondo has encouraged each firms to contemplate manufacturing on the factory Intel is currently constructing in Ohio, Bloomberg reported. But neither company currently plans to accomplish that.
Intel has announced that other firms, including Microsoft, are exploring the potential of using the technology of their chip designs, but to date those efforts haven’t resulted in large orders or significant revenue.
The Pentagon could be a difficult customer for chipmakers. A recent report from the National Academies of Sciences, Engineering, and Medicine found that firms involved in a so-called Trusted Foundry program — a long-running project just like Secure Enclave but focused on older-generation chips — often struggle to satisfy Department of Defense requirements or get a return on investment from those contracts.
The Pentagon was originally purported to fund the majority of the Secure Enclave program, but in February backed out of its $2.5 billion commitment. Lawmakers then placed the complete burden on the Commerce Department, which was chargeable for the remaining $1 billion share. Bloomberg reported that the agency had at one point planned to incorporate its latest commitments for Secure Enclave within the funds already put aside for Intel, but officials ultimately decided to treat this system entirely independently of the industrial production incentives.
The drama spread to other firms. In response to the funding dispute, the Commerce Department canceled a planned industrial research and development program, forcing officials to refuse a funding request from Applied Materials Inc. for a $4 billion Silicon Valley project. Efforts so as to add $3 billion to the Chips Act, which might allow the Commerce Department to revive the initiative, have stalled in Congress.
(Updated with Intel shares in seventh paragraph.)
Datasheet: Stay on top of the technology business with in-depth evaluation from the largest names within the industry.
Register here.
