Unexpected Intel military chip contract drained $3 billion from CHIPS Act, Senate mulls auction to restore funds

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Global semiconductor trade group SEMI is applauding the U.S. Senate’s plans to solve the funding gap in the 2022 CHIPS Act. The shortfall stems from a $3 billion military chip contract with Intel, for which the U.S. Department of Defense was slated to pay $2.5 billion. However, the agency later reneged on its funding commitment, leaving the Commerce Department holding the bag. The additional funds will come through the Spectrum and National Security Act, currently at its second reading at the Upper House. This bill will allow the FCC to auction off licenses in the 12.7 to 13.25 GHz frequency bands, and the proceeds will then be used to fund various government tech programs, including the CHIPS and Science Act.

This is crucial for the CHIPS Act, as its $39 billion allocation for domestic manufacturing is already being stretched as it is. Intel will receive a $10 billion payout from the CHIPS Act, more than 25% of the fund’s manufacturing budget. In addition, the company was set to receive an additional $3.5 billion to build defense chips for the American military. This was supposed to be split between $1 billion from the Department of Commerce, with the Pentagon footing the remaining $2.5 billion.

However, the U.S. Department of Defense unexpectedly pulled out of its two-and-a-half billion-dollar commitment to Secure Enclave, meaning the Department of Commerce is left holding this massive bag. This adds to the strain on the CHIPS Act funding, especially as the requested grants and other monetary support for building fabs have already reached $70 billion — almost double the budget set by Washington.

If the Spectrum and National Security Act passes into law, it will cover the unexpected shortfall in the factory funding caused by the Pentagon’s pullout. Furthermore, it will add an extra $5 billion for research and development covered by the CHIPS Act. While these may look like a drop in the bucket with the CHIPS Act’s total budget of $280 billion, the White House feels that it’s not enough for the U.S. to retain global semiconductor leadership, with Commerce Secretary Gina Raimondo calling for CHIPS Act 2.

The U.S. needs to pour more effort and resources into chip development, especially as China pours money into its domestic chip production. While America’s bans and sanctions have negatively affected Chinese ambitions in semiconductor supremacy, history has taught us that these are not quite effective at curtailing progress. It may cause a temporary disruption, but human ingenuity and creativity could allow China to catch up nonetheless. So, if the White House wants America to maintain its leadership in the semiconductor space, it needs to pour billions (or even trillions) into it.

Freelance News Writer
  • JTWrenn
    No. We should pull it from the military funding. The miltary has its own funding and it shouldn't get to pull from every pot and keep it's own. It's just another way to hide the true cost of war.
    Reply
  • DS426
    CHIPS Act 2.0 already? And Intel will get almost a quarter of that as well? F*** no. How about we figure out how to boost U.S. domestic production including for fabless semiconductor companies like AMD and dozens more (don't just help the top 2 or 3 market leaders).
    Always impressive how great the government is at spending taxpayer dollars. How about we get our #2 greatest expense item under control: interest on our nation debt. I mean FFS, Intel, AMD, nVidia, and others will more than survive at the end of the day -- they are the greatest beneficiaries of this AI craze and bubble that we're living in.
    Reply
  • hotaru251
    JTWrenn said:
    We should pull it from the military funding.
    as an american this.

    Military always wants more funding yet doesnt want to use its funds to pay for its contracts.
    Either take it for mtheir funds or just cancel it and make them have to pay any fees.
    Reply
  • edzieba
    It was not the "intel military chip contract" that was unexpected. It was the DoD pulling funding that was unexpected.
    Reply
  • kidnan2505
    Imagine if the govt hadn't let Intel run amok with illegal practices? AMD would potentially still have Global Foundries. The losses they took and the paltry payouts they DID manage to get in court were scarring.
    The Govt loves to take the most longest, backwards path possible it seems.
    It wouldn't have solved everything, but really an indicator of who we're dealing with.
    Short sighted folks with agendas.
    Reply
  • garrett040
    So tired of my money being forcefully taken from me to support business that can't support themselves.
    Reply
  • PEnns
    JTWrenn said:
    No. We should pull it from the military funding. The miltary has its own funding and it shouldn't get to pull from every pot and keep it's own. It's just another way to hide the true cost of war.

    Exactly.

    The Pentagon budget is astronomical already, but now they want to spend money from other budgets!
    Reply
  • PEnns
    garrett040 said:
    So tired of my money being forcefully taken from me to support business that can't support themselves.
    Even the ones that can support themselves get money! Intel is a prime example.
    Reply
  • husker
    "Unexpected Intel military chip contract drained $3 billion from CHIPS Act, Senate mulls auction to restore funds"What are they planning to auction off to raise $3 billion?
    Reply
  • FoxtrotMichael-1
    hotaru251 said:
    as an american this.

    Military always wants more funding yet doesnt want to use its funds to pay for its contracts.
    Either take it for mtheir funds or just cancel it and make them have to pay any fees.
    It’s really easy to take this stance, until you look at readiness rates and what it would actually take to win a war against China. If anything, the military budget (especially Naval) isn’t nearly large enough to keep up with emergent threats in the Pacific. We need 3 Marine Expeditionary Units (MEUs) at all times (including ships, support craft, landing craft, air support, and armor) to keep our existing security posture in the Pacific. Currently the Navy and Marine Corps are funded for 2. So, it’s a very easy position to take to say “they already get too much money!” The reality is much more complicated. It’s expensive to be an empire.
    Reply