Intel's chief financial officer has confirmed the company has received $5.7 billion from the Trump administration as part of a deal that sees the US government taking a 10% stake in the company, as per CNBC. Although this move is highly unprecedented, with some Republican lawmakers likening it to socialism, or communism, Intel claims it was part of a move to prevent it from selling its chip fabrication business.
Intel has fallen on tough times in recent years. It's lost many of its top performance positions to AMD, and its fabrication business has suffered under increasing competition from TSMC and Samsung. Although it still has exciting new chips in the works, and received a major investment from the last-government's CHIPS act, it was still considering selling the entire chip manufacturing arm of its business. That is, until the U.S. government stepped in.
Under the move, $8.9 billion of federal grants that Intel received as part of the CHIPS act was converted into equity in the business. The agreement also stated that if Intel ever sells more than 49% of its foundry business, that the government could purchase an additional 5% shares at $20 each, thereby discouraging Intel from doing so.
“I don’t think there’s a high likelihood that we would take our stake below the 50 percent, so ultimately I would expect [the warrant] to expire,” CFO David Zinsner told a Deutsche Bank conference on Thursday, via FT.
“I think from the government’s perspective, they were aligned with that: they didn’t want to see us take the business and spin it off or sell it to somebody.”
Intel has faced pressure to sell its chip manufacturing business as it has remained a loss leader for the company for several years. In 2024 alone, it lost $13 billion amidst increasing competition from TSMC and a lack of interest in Intel's cutting edge silicon. Although it can produce process nodes that are competitive with TSMC and Samsung, we learned in July that it was considering cancelling its 14A process designs if it couldn't secure a customer for them. Outright selling the fab business may also have been on the table.
Whatever the reverse of blood in the water is, other companies have clearly smelled it. Japanese investment company, Softbank, is investing $2 billion in Intel (after sniffing around to buy the foundry arm of its business), seemingly understanding that Intel won't be allowed to fail with such deep interest from the US government. This comes at a time of increasing nationalization around chip design and access to cutting-edge silicon for AI development and military use.
In other fundraising initiatives, Intel has seen heavy downsizing and restructuring under new CEO, Lip-Bu Tan, and is reportedly selling off $1 billion of stock in its autonomous driving company, MobileEye, as well as selling a controlling stake in specialist chip design firm, Altera.
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