AMD, Nvidia Shut Out as Intel Eyes $52 Billion CHIPS Act Windfall

Intel has made a big stink about the $52 billion CHIPS Act, which would bolster the domestic production of semiconductors. Taiwan Semiconductor Inc. (TSMC) has become the dominant force globally in the contract chipmaking sector, and Intel is keen on regaining the market share that it has lost in recent decades. If the CHIPS Act passes, Intel will move forward with an initial investment of $20 billion into a new Ohio "mega site" fab (up to $100 billion could eventually be invested in the site).

But some in the U.S. semiconductor industry feel that the version of the CHIPS Act, which is set to be voted on as early as tomorrow by the Senate, unfairly benefits Intel. According to Reuters, the $52 billion in subsidies and tax benefits afforded by the bill will provide the bulk of the benefits to companies like Intel. Intel designs and manufactures the majority of its semiconductors, and the CHIPS Act heavily favors offsetting the cost of building new fabs in the U.S. Other major U.S.-based companies that design and manufacture their own chips include Micron and Texas Instruments.

A separate FABS Act (which has bipartisan support) would offer up to a 25% tax credit for the construction of fabs and the manufacturing equipment necessary to operate the facilities. 

However, Intel's most direct competition in the client computing, graphics, and server/HPC markets comes from AMD and NVIDIA. While AMD and NVIDIA are U.S.-based and design their own microprocessors, they contract outside firms like TSMC and Samsung to produce their chips. As a result, they wouldn't be able to reap the full benefits of the $52 billion windfall from the U.S. government.

The U.S. House of Representatives is currently debating a version of the FABS Act that would be more beneficial to companies like AMD and NVIDIA, as it would offer tax incentives also covering aspects of semiconductor design. However, even if those provisions were added, Intel still stands to gain the most from the CHIPS and FABS Acts than its peers.

"You have Intel that might get $20 billion with CHIPS Act plus $5 billion or $10 billion under the FABS Act," said an official for one unnamed Intel competitor that is opposed to the soon-to-be-voted upon version of the CHIPS and FABS Acts. "So, $30 billion goes to your direct competitor, and you don't get a penny? That's going to cause problems in the market."

Intel CEO Pat Gelsinger has aggressively pushed for the CHIPS Act to pass, and has even threatened to back out of the Ohio fab if the package fails. "We've made super clear to McConnell, to the Democrats, to the Republicans, that if this doesn't pass, I will change my plans," Gelsinger said last week. "The Europeans have moved forward very aggressively, and they're ready to give us the incentives that allow us to move forward." 

Gelsinger is referencing $43 billion in subsidies that the European Union is offering to support local manufacturing.