Government announces intentions for Intel participation
The U.S. government has announced plans to invest $8.9 billion in Intel, acquiring a 9.9 percent stake in the tech giant. This move aims to boost U.S. semiconductor production and strengthen the country's position in the global chip industry.
The investment, which involves purchasing 433.3 million shares at $20.47 per share, is part of a broader effort to bolster domestic chip manufacturing. The government's ownership will be passive, without board representation or governance rights, but it will vote in line with Intel's board, except in limited circumstances.
The investment aligns with Intel's ongoing expansion, driven by the CHIPS and Science Act, which had previously granted Intel $2.2 billion in funds related to this initiative. The $8.9 billion investment includes nearly $6 billion from previously awarded but unpaid CHIPS Act grants.
The government also received a five-year warrant to purchase an additional 5% of Intel common shares if Intel were to reduce its ownership below 51% of its foundry business. This ensures long-term U.S. influence in Intel's chip manufacturing operations.
The U.S. government's strategic partnership with Intel marks a significant step towards bringing more chip production back to the West. Currently, high-tech chips are almost exclusively produced in Asia, mainly in Taiwan.
In response to the news, Intel's stock rose by more than eleven percent to around $26 in early U.S. trading on Tuesday. The purchase price is slightly below Monday's closing price at $23 per share.
Meanwhile, SoftBank, a technology company, is buying Intel shares worth $2 billion (1.7 billion euros). SoftBank owns the majority of chip designer Arm, whose technology is used in virtually all smartphones and tablet computers.
President Donald Trump, who has previously referred to subsidies for chip companies to expand U.S. production as a waste of money, has welcomed the investment, calling it what American taxpayers deserve. Trump prefers high import tariffs to encourage chip companies to manufacture in the U.S.
The investment comes as Intel faces challenges in the semiconductor market, particularly in artificial intelligence, graphics cards, and traditional businesses like PC processors and data centers. Nvidia has taken a leading position in the artificial intelligence chip market.
It's worth noting that plans for a large factory in Magdeburg were abandoned due to lack of demand. Intel is receiving a multi-billion-dollar cash injection from Japan as part of this strategic partnership. SoftBank is also expanding its U.S. activities and is involved in the "Stargate" project with OpenAI to build giant data centers for artificial intelligence.
[1] CNBC, "U.S. to invest $8.9 billion in Intel, becoming major shareholder," 2022. [2] Reuters, "U.S. to buy 9.9% stake in Intel for $8.9 billion," 2022.
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