The Commerce Department is taking its biggest step yet toward onshoring semiconductor manufacturing with a historic $19.5 billion funding deal with Intel, which the Santa Clara, Calif.-based semiconductor giant plans to use for four new production facilities across the country.
President Biden signed the $53 billion CHIPS and Science Act into law in August 2022, committing to ensure that the U.S. could design and manufacture the advanced computer chips that power everything from lawnmowers to supercomputers on its own soil, instead of having to outsource production to Asia. That was a little over a year and a half ago, but the first grant—a meager $35 million to New Hampshire-based BAE Systems—wasn’t announced until last December.
Lengthy application processes have drawn criticism from manufacturers and industry watchers, but this Intel agreement is the first of what the Commerce Department says will be a wave of big grants to come.
“It’s a huge deal,” U.S. Secretary of Commerce Gina Raimondo said on a call with reporters. “It means bleeding-edge semiconductors made in the USA, keeping the USA in the driver’s seat of innovation.”
If Intel meets performance targets in the deal, it’ll be eligible for $8.5 billion in federal grants, an additional $11 billion in CHIPS Act loans and a 25% Treasury tax credit. A senior administration official said that the Intel grant was expected to be the largest single grant administered through the CHIPS Act, and once the Commerce Department and Intel agree on final terms, the government expects to start delivering funds by the end of the year.
In addition to the grant, Intel has already invested over $100 billion in private capital toward domestic semiconductor manufacturing since the CHIPS Act was signed.
Raimondo said that the Intel grant keeps the U.S. on pace to manufacture 20% of the world’s bleeding-edge logic chips, which are essential for many A.I. and military applications, by the end of the decade. (The U.S. currently doesn’t produce any of these chips.)
Intel has announced four new facilities in Arizona, New Mexico, Ohio, and Oregon, and it estimates that building and running the facilities will generate over 30,000 jobs. The Rio Rancho, New Mexico project will modernize two fabrication sites into the largest advanced packaging facility in the country. Packaging, which refers to combining the multiple parts of a chip, has emerged as a key aspect of production as manufacturers race to fit more computing power into smaller and smaller chips.
“Onshoring packaging is just crucial to meet our national security goals,” Raimondo said.
Despite the slow rollout of CHIPS Act grant funding, many are already heralding the program as a success because of the private investment it’s generated. Anticipating big infusions of federal cash, private investors have already poured over $200 billion in capital into semiconductor manufacturing.
“This is a major, historic moment,” said a senior administration official on a call with reporters announcing the Intel deal. “What we are seeing here, in terms of unlocking hundreds of billions of dollars in private investment…is unparalleled in the economic history of our country.”
Raimondo said in a speech last month that the Commerce Department is prioritizing projects that will be completed before 2030 as it makes funding decisions, more of which should be coming later this year. The agency received over 600 statements of interest from semiconductor companies that have already requested over $70 billion in funding, far more than the $28 billion it has earmarked for chip manufacturing. That required some challenging decisions, Raimondo said.
“The point of this program isn’t to sprinkle a bunch of money out to as many companies as possible, even though, candidly, that would be easier,” Raimondo said. “Our job is to make targeted investments in the relentless pursuit of achieving our national security objectives.”