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Intel Wins $8.5B in Federal Chip Factory Subsidies

The Biden administration awarded Intel $8.5 billion in subsidies this week and promised it $11 billion in loans to go toward financing new semiconductor factories.

Intel sign
(TNS) — The Biden administration awarded Intel $8.5 billion in subsidies Wednesday and promised it $11 billion in loans to finance new semiconductor factories. Federal officials said Intel’s award will be the biggest from the $52 billion CHIPS Act Congress passed last year.

The money will help pay for the multibillion-dollar expansion of Intel’s D1X research factory in Hillsboro, along with new plants in Ohio and Arizona and a packaging facility in New Mexico. Intel puts the combined price tag for those projects at around $100 billion.

President Joe Biden planned to formally announce the funding in the crucial electoral swing state of Arizona on Wednesday.

The federal money will significantly defray the cost of Intel’s factories, especially because the chipmaker is also eligible for credits on its federal taxes worth up to 25% of its spending on capital projects. The tax credits will add billions of dollars to the value of Wednesday’s deal.

But Intel indicated it wants more.

CEO Pat Gelsinger said he is counting on additional federal funding this year for defense-related semiconductor projects. And he said he hopes for a second CHIPS Act to reverse the long erosion of domestic technology manufacturing.

“It took us three-plus decades to lose this industry,” Gelsinger told reporters. “It’s not going to come back in three to five years.”

The U.S. Commerce Department declined to specify how it will allocate Intel’s money by region but said the company will receive the subsidies in tranches as it meets milestones laid out in its funding agreement over five years.

Oregon is home to Intel’s most advanced research, setting the cadence for its overall technology development. The chipmaker is looking to new manufacturing equipment called extreme ultraviolet lithography to enable it to accelerate the pace of new technology.

Intel says the latest expansion of the D1X plant in Hillsboro will add 2,000 jobs to the 23,000 it already employs in Oregon, plus thousands of temporary jobs during construction.

Intel hasn’t said when work on D1X will begin. Regulatory filings last year suggest Intel anticipated starting construction in 2025, continuing for at least three years.

“The continuous federal investment in the Silicon Forest and its central role in world-class innovation means a stronger economy in Washington County and significant statewide ripple effects for employment opportunities that benefit Oregonians,” said U.S. Sen. Ron Wyden, D-Oregon. Wyden helped steer the CHIPS Act through Congress.

U.S. Commerce Secretary Gina Raimondo said it’s essential that the U.S. restore its capacity for manufacturing leading-edge computer chips.

“To stay ahead, we can’t just design chips. We have to make them in America. Right now we’re in an untenable position,” Raimondo told reporters on a conference call.

The U.S. has a host of chip companies designing advanced semiconductors, among them Nvidia, AMD and Apple. But currently all those chips are manufactured in Southeast Asia. Raimondo said it’s essential to the American economy and domestic security that more of those chips be made at home.

The Biden administration says geopolitical risks to semiconductor factories in Taiwan and South Korean, and the global supply chain issues that emerged during the pandemic, underscore the importance of bolstering the domestic chip industry. The administration wants 20% of leading-edge chips made in the U.S. by the end of the decade.

“This announcement is going to put us on track to meet that goal,” she said. “We have to. Failure is not an option.”

Intel’s Hillsboro expansion plans are under review by the Oregon Department of Environmental Quality, which is scrutinizing the company’s air quality permit application. The chipmaker wants permission to double some emissions at the site, dramatically increasing its output of greenhouse gases, nitrogen oxide, nitrogen dioxide, carbon monoxide and other pollutants.

Oregon issued a draft permit for the expansion project last month, but environmental advocates say the final permit needs to spell out how regulators will monitor Intel’s emissions and inform the public about local air quality.

Intel’s funding is the fourth award the Biden administration has made under the CHIPS Act. It began parceling out money in January, awarding $162 million to Microchip Technology for the expansion of factories in Gresham and in Colorado.

Several other companies are hoping for a share of the $52 billion in federal money to spend on Oregon projects, including Jireh Semiconductor in Hillsboro and HP in Corvallis.

Oregon lawmakers approved $500 million in chip industry incentives last year, including $240 million in direct subsidies. Intel is in line for $115 million in state money.

Semiconductor manufacturing is among Oregon’s largest economic sectors. It surged in 2021 and 2022 as chipmakers cashed in on pandemic-era demand for electronic components. But employment dipped last year as customers worked through a glut of chips and manufacturers cut production in response.

State economists say the chip industry will add several thousand jobs in the coming years, though, bolstered by the state and federal funding along with rapid growth in data centers and artificial intelligence.

Intel’s funding includes $50 million in workforce development money for programs like the intensive two-week Quick Start training program at Portland Community College’s Willow Creek campus in Hillsboro.

Wednesday’s award is the culmination of years of Intel lobbying, work that made Gelsinger a familiar presence on Capitol Hill, at the White House and on political talk shows. Still, he said it marks just a first step.

Congress should consider fresh legislation to adopt tax policies and financial incentives that make semiconductor manufacturing in the U.S. economically competitive with making chips in Asia, Gelsinger said.

“We’ll need at least a CHIPS 2 to finish that job,” he said.

The Biden administration has been noncommittal about those suggestions. For the moment, at least, Gelsinger said Wednesday’s award meets the objectives Intel had in mind as it pushed for federal backing in 2021 and 2022.

“We think this is a defining moment,” he said, “for the United States, for Intel and for the semiconductor industry.”

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