US buys Intel stake with Chips Act cash
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The US government has bought a 9.9% stake in chip maker Intel using cash from its Chips Act.
The deal, cited as ‘historic’ comes after the Trump administration called for Intel CEO Lip-Tan Bu (above, right) to step down over his links to China through his venture capital fund, Walden International.
The purchase of 433m shares direct from Intel cost the US government $8.9bn, a 20% discount to the market value, and will be funded by the remaining $5.7bn in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2bn awarded to the company as part of the Secure Enclave programme. The deal is expected to complete on Tuesday 25th August according to the 8K form filed with the Securities and Exchange Commission (SEC) on Monday. As a result will dilute the Intel shareholding and the shares will be available for the government to sell after one year.
The Chips Act cash was being used for the development of fabs in Ohio that have since been put on hold. The existing claw-back and profit-sharing provisions associated with the government’s previously dispersed $2.2 billion grant under the CHIPS Act will be eliminated.
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Although the Trump administration says it does not plan to put a member on the board of directors, the stake will give the US government more direct say in the direction and strategy of the company. This is particularly important as Intel has looked at selling off its fabs in its separate foundry business and is a major customer of Taiwanese foundry TSMC.
A key example of this influence is that the deal also includes a five-year warrant, at $20 per share for an additional five percent of Intel common shares, if Intel ceases to own at least 51% of the foundry business.
“Intel is excited to welcome the United States of America as a shareholder, helping to create the most advanced chips in the world,” said Howard Lutnick, United States Secretary of Commerce (above, left). “As more companies look to invest in America, this administration remains committed to reinforcing our country’s dominance in artificial intelligence while strengthening our national security.”
The deal was backed by major customers, including Microsoft, Dell, HP and Amazon Web Services.
“As the only semiconductor company that does leading-edge logic R&D and manufacturing in the U.S., Intel is deeply committed to ensuring the world’s most advanced technologies are American made,” said Lip-Bu Tan, CEO of Intel. “President Trump’s focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country’s economic and national security. We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership.”
“The industry needs a strong and resilient U.S. semiconductor industry, and no company is more important to this mission than Intel. It’s great to see Intel and the Trump Administration working together to advance U.S. technology and manufacturing leadership,” said Michael Dell, Chairman and CEO at Dell.
PJT Partners acted as exclusive financial advisor for the investment agreement.
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