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Intel gets $8.5 billion in grants to build chip factories

Intel gets $8.5 billion in grants to build chip factories

President Biden plans to announce Wednesday that his administration will award up to $8.5 billion in grants to Intel, a major investment to boost the nation's semiconductor production, during a tour of battleground states aimed at promoting his economic agenda.

Biden is scheduled to make the announcement during a visit to Intel's campus in the Chandler suburb of Phoenix, Arizona, White House officials said. The award, which will go toward building and expanding Intel facilities across the United States, is the largest awarded by the federal government with funding from the CHIPS Act, which lawmakers passed in 2022 to help reestablish the United States as a leader. In semiconductor manufacturing.

The Biden administration, equipped with $39 billion in subsidies for distribution, is leading an ambitious effort to ramp up production of the microchips that power everything from smartphones to computers and cars. These efforts are at the heart of Biden's goal to reduce America's dependence on foreign countries: Although semiconductors are invented in the United States, only about 10% of the world's chips are manufactured domestically.

In addition to the grants, the federal government plans to give Intel up to $11 billion in loans on terms that the company described as generous. Intel is also expected to claim federal tax credits that could cover 25 percent of expenses for expansion projects in the United States, which are expected to cost more than $100 billion over five years.

The grants are intended to help fund the company's construction plans in Arizona, Ohio, New Mexico and Oregon. These projects are expected to create more than 10,000 manufacturing jobs and about 20,000 construction jobs, according to Biden administration officials.

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In Arizona, the money will help finance Intel's recent construction of two advanced factories and the modernization of another facility. The funds will also help build a brand-new site near Columbus, Ohio, starting with two plants, marking its first move to a new U.S. region in more than 40 years.

In Rio Rancho, New Mexico, Intel will use federal funds to convert two factories into advanced packaging facilities, where chips are assembled together to boost performance and reduce costs. The company will also expand and modernize its innovation center in Hillsboro, Oregon, which is expected to strengthen the company's technology leadership and develop new innovations.

Commerce Secretary Gina Raimondo, whose department oversees grant distribution, said the award will help increase the country's production of the most advanced semiconductors, which are used in artificial intelligence, smartphones, supercomputers and the most sensitive military devices. . The United States currently produces nothing.

“We rely on a very small number of factories in Asia to get all of our most advanced chips,” Ms. Raimondo said during a call with reporters. “This is indefensible and unacceptable. It is an economic security problem, it is a national security problem, and we will change that.”

Ms. Raimondo said Intel's award will be the largest grant awarded by the chipmaker under the new program. The investment will also help put the United States on track to produce nearly 20 percent of the world's leading chips by the end of the decade, she added.

Biden and his Democratic allies view semiconductor investments as a key way to try to change perceptions of the economy among voters in battleground states like Arizona.

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“We haven't talked to people about the issues that President Biden has raised, and that's what we're determined to do,” Yolanda Bejarano, chair of the Arizona Democratic Party, said Tuesday, adding that Democrats will need to talk more. On the impacts of semiconductor investments.

Although Intel will have to achieve some milestones before the money is distributed, senior Biden administration officials said they expect money to start flowing to the company by the end of this year.

Intel CEO Patrick Gelsinger told reporters at a news conference Tuesday evening that the government incentives represent a proud moment for his company and a major accomplishment for politicians of both parties. Although he was satisfied with the incentives allocated to Intel, he said officials may need to invest more in the industry to reverse decades of shifting investment from the United States to countries in Asia.

“This problem cannot be solved in one three- to five-year program,” Gelsinger said. “I think we'll need at least CHIPS 2 to finish this job.”

Intel is the fourth company to receive a federal award under the new program, and the announced grants total more than $10 billion. The first three grants — awarded to GlobalFoundries, Microchip Technology and BAE Systems — were for makers of older chips, which are created using older production processes but are still used in many products such as cars and dishwashers.

Biden administration officials are expected to announce more awards in the coming months for other major chipmakers, including Taiwan Semiconductor Manufacturing Co., Samsung and Micron Technology. These companies have also made significant investments in new or expanded semiconductor manufacturing plants in the United States in recent years.

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The United States' dependence on Asia to manufacture its chips has become more evident with the emergence of artificial intelligence. Almost all of the chips used to power the latest generative AI services are made in Taiwan by TSMC, though they were designed by Nvidia in Silicon Valley.

Intel is trying to change that by developing new manufacturing technology, starting to build chips designed by other companies and pushing hard for legislation. The investment in Intel is intended to help enable US companies to lead in the AI ​​industry by ensuring a domestic supply of advanced chips.

About $50 million in federal funding will be allocated to Intel to spend on training and developing its workforce. Many semiconductor companies and industry groups have expressed concerns about a potential shortage of technicians, engineers and other workers to fill all the jobs that will be created once the facilities are built.

In total, private companies have announced more than $240 billion in investments in semiconductor and electronic manufacturing since Biden took office, according to administration officials. However, some chipmakers have encountered hurdles as they try to expand their domestic manufacturing capacity, leading to delays.