sb.scorecardresearch

Published 12:12 IST, November 28th 2024

Intel's $7.86 billion subsidy deal restricts sale of its chip manufacturing unit

Intel has said that its deal for $7.86 billion in US government subsidies restricts the company's ability to sell stakes in its chipmaking unit if it becomes an independent entity.

Reported by: Thomson Reuters
Follow: Google News Icon
  • share
US considering more than $10 bn in subsidies for Intel
Intel | Image: Intel

Intel has said that its deal for $7.86 billion in US government subsidies restricts the company's ability to sell stakes in its chipmaking unit if it becomes an independent entity.

The US Commerce Department announced the subsidy to Intel on Tuesday, part of $39 billion for the sector including Taiwan Semiconductor Manufacturing Co and others in an effort to revitalize chip manufacturing in the United States.

The US Department of Commerce earlier this week earlier planned to provide a subsidy of $8.5 billion to the chipmaker. However, it decided to settle on $7.86 billion subsidy after the company won a separate $3 billion award from the Pentagon. This award supports manufacturing projects worth nearly $90 billion across the US including the ones in Arizona, New Mexico and Ohio.

Notably, the $7.86 billion subsidy is the largest one awarded in the US under a 2022 law that aims to boost semiconductor manufacturing in the country.

Intel Chief Executive Pat Gelsinger in September said that the company planned to spin its chip manufacturing operations into a subsidiary and was open to taking on outside investors in the unit, called Intel Foundry.

In a securities filing, Intel said on Wednesday the subsidies require it to own at least 50.1 percent of Intel Foundry if the unit is separated into a new privately held legal entity. If Intel Foundry becomes a public company and Intel itself is not the largest shareholder, the company could sell only 35 percent of Intel Foundry to any single shareholder before running into change-in-control provisions.

Intel did not immediately respond to a request for comment on the disclosures. A Commerce Department spokesman said the government is negotiating change-in-control provisions with all direct grant recipients.

Intel would need to comply with the restrictions to continue the company's $90 billion worth of projects in Arizona, New Mexico, Ohio, and Oregon and keep manufacturing cutting-edge chips in the U.S., according to the filing. Any changes in control could require Intel to seek permission from the U.S. Department of Commerce, the filing said. 

Updated 12:16 IST, November 28th 2024