The U.S. Commerce Department has taken a significant stride towards onshoring semiconductor manufacturing by finalizing a landmark $19.5 billion funding agreement with Intel, a leading semiconductor company based in Santa Clara, California. This funding is earmarked for the establishment of four new production facilities across the nation.
President Biden endorsed the $53 billion CHIPS and Science Act in August 2022, aiming to bolster the United States' capacity to design and manufacture advanced computer chips domestically, reducing reliance on overseas production in places like Asia. Following this legislation, the first grant from this initiative was recently awarded to New Hampshire-based BAE Systems after a lengthy application process that faced criticism from industry experts. The recent deal with Intel marks the beginning of what the Commerce Department envisions as a series of substantial grants to be disbursed in the future.
U.S. Secretary of Commerce, Gina Raimondo, emphasized the significance of this agreement, highlighting the importance of producing cutting-edge semiconductors within the country to maintain a leading role in innovation. Intel stands to gain significant benefits from meeting performance targets in the deal, including potential access to $8.5 billion in federal grants, an extra $11 billion in CHIPS Act loans, and a 25% Treasury tax credit. The government anticipates disbursing these funds by the end of the year once the final terms with Intel are agreed upon.
Intel has already contributed over $100 billion in private investments towards domestic semiconductor manufacturing since the implementation of the CHIPS Act. Raimondo noted that with this additional funding, the U.S. aims to manufacture 20% of the world's leading-edge logic chips by the end of the decade, a capability the country currently lacks.
Intel's plans to establish new facilities in Arizona, New Mexico, Ohio, and Oregon are projected to create over 30,000 job opportunities. Notably, the project in Rio Rancho, New Mexico is slated to transform two fabrication sites into the largest advanced packaging facility in the nation. Advanced packaging, crucial for combining different chip components, has become a significant focus area as manufacturers strive to enhance computing power in smaller chip sizes.
Raimondo stressed the importance of onshoring packaging for national security objectives. Despite some delays in grant disbursement, the CHIPS Act has already shown success by attracting substantial private investment in semiconductor manufacturing, totaling over $200 billion.
Looking ahead, the Commerce Department is prioritizing projects set for completion before 2030, with more funding decisions expected in the near future. With a high demand for funding exceeding the allocated budget, the Department faces challenging decisions in selecting the most impactful investments, aligning with national security goals rather than merely distributing funds widely across the industry.
