Trump Admin. Takes 10% Stakes in Intel In Exchange For $11.1 Billion CHIPS A...

TMTPOST -- The Trump administration is taking an aggressive step to reprogram the operations of major chipmakers, moving forward its plan to take stakes in the troubled Intel Corporation.

Credit：Howard Lutnick

The United States now “fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” President Donald Trump announced in a post on Friday. Trump said he made a request for a 10% stake in Intel during his meeting with the CEO Lip-Bu Tan, and Tan agreed to do so. "He walked in wanting to keep his job, and he ended up giving us $10 billion for the United States," Trump told reporters.

Trump in his post touted “a great deal for America” since the U.S. government “paid nothing for these shares” now valued at around $11 billion. He also highlighted significance of the deal as Intel is building cutting-edge semiconductors, which is “fundamental to the future of our Nation.”

U.S. Commerce Secretary Howard Lutnick also confirmed the news in a post on X. He described the deal as a “historic agreement”.that strengthens U.S. leadership in semiconductors, which will both grow our economy and help secure America’s technological edge. Lutnick also thanked to Tan for making the deal that is “fair to Intel and fair to the American People.”

Intel later Friday unveiled some details of the agreement. The company suggested it agreed to give a nearly 10% stake to the Trump administration in exchange for a total of $11.1 billion funding under the CHIPS and Science Act of 2022 (CHIPS Act) .

Under the agreement, the U.S. government will make an $8.9 billion investment in Intel common stock on top of the $2.2 billion in CHIPS Act grants Intel has received to date. “The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program,” said Intel in a statement.

With the $8.9 committed investment, the U.S. government agreed to purchase 433.3 million primary shares of Intel common stock at a price of $20.47 per share, equivalent to a 9.9% stake in the company. The federal government thus became one of Intel’s biggest shareholders, and took the stakes at an over 17% discount from Intel’s closing on Friday. Shares of the company rose 5.5% that day following Trump’s announcement.

Despite the investment, the U.S. government will have no board seat or other governance or information rights, and it agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions. The government will receive a five-year warrant, at $20 per share for an additional five% of Intel common shares, exercizable only if Intel ceases to own at least 51% of the foundry business.

Signed into law in August 2022, the CHIPS Act allocated $53 billion in federal incentives for domestic semiconductor manufacturing and research and development (R&D), of which $39 billion is set aside for a financial assistance program—also called the CHIPS for America Fund—administered by the U.S. Department of Commerce to build new and expand existing semiconductor facilities. Companies are also eligible for a 25% tax credit.

While U.S. and foreign companies with facilities in the United States are eligible for the CHIPS Act, Intel, as the only American company capable of making advanced chips on U.S. soil, was already deemed as the biggest beneficiary of the federal incentives.

Intel under the act was awarded $7.9 billion in grants for commercial semiconductor manufacturing and as much as an additional $3 billion for the Pentagon’s Secure Enclave program. It also has an option to draw an $11 billion loan under the act.

But Intel has fallen badly behind competitors in recent years. The company last month reported its foundry business booked an operating loss of $3.2 billion for the second quarter. And the same month saw it warned that the business may be paused or discontinued entirely if it could not secure a customer on its next technology cycle.

Analysts said the Trump administration may take more actions to bail out the chipmaker following conversion of CHIPS Act grants to stakes.

“This seems to indicate the government is definitely going to play a much more influential role in the company, particularly to keep the foundry alive in the U.S.” through some combination of dealmaking or changes at Intel, said Ray Wang, a semiconductor analyst at research and advisory firm Futurum Group.