Intel’s CHIPS Act funding is definitely at risk, but not because of the loss of Gelsinger as CEO. Intel has bet pretty much everything on 18a and that will continue under a new CEO. Probably. Maybe.
Intel (INTC) is in crisis. The company forced out CEO Pat Gelsinger on Monday, its stock price is down more than 50% on the year, and the grand plan to add third-party semiconductor manufacturing to its repertoire is suddenly more unclear than ever.
Gelsinger’s gambit to transform Intel into a US-based version of Taiwan’s TSMC that builds chips for its rivals is one of the reasons the company received $7.8 billion in CHIPS Act funding. But the foundry business, which it plans to operate as an independent subsidiary, has been hemorrhaging money and its biggest customer is still Intel itself.
Intel’s CHIPS Act funding is at risk because it might not be able to stick to the agreements it made with the Biden Administration regarding investment and control. Intel’s agreement with the Department of Commerce basically says it cannot just ditch its foundry business and give up control.
Well, there’s the problem. Intel’s financial situation is poor enough that it has to consider ditching its foundry business… basically splitting into two Intels. One design business and one foundry business. Both of which will be listless. And the Federal Government probably isn’t going to help more under the Trump Administration. Intel is a loser. Trump doesn’t like losers.
So Intel will basically be no more.
All because of the arrogance of Intel’s management and the Federal Government’s inaction in the Biden and Trump Administrations. Intel’s management, both mid level and high level have been arrogant and politicized for years and years. You have managers caring about nothing but maintaining their fiefdoms inside the company and being assholes to everyone. Intel’s troubles can be laid directly at the feet of its management past and present.
But back to the CHIPS Act… god only knows how this is going to turn out. Intel needs the $8 billion to maintain cash reserves. In fact it needs more than the $8 billion to maintain cash reserves AND meet its investment needs. I don’t think it can just return the money and call it a day and survive as a company.
And the point should be made that the CHIPS Act funding is meant to improve national security, keeping fabs in America happy and healthy. Generally speaking when national security comes up the government would prefer you follow along and do as you’re told. Splitting the foundry business isn’t the best of moves then… so maybe Intel CAN’T return the CHIPS Act money?
So Intel might lose its CHIPS Act money in several ways, the government may or may not prevent a split of Intel’s businesses, the government may even prevent Intel from returning CHIPS Act money, the Trump Administration might not care very much…
We’re living in a weird world right now.
Everyone outside of Intel is seeing a different path forward but nobody is actually executing on those plans to a meaningful extent. Intel is left flailing around praying 18a saves them and they don’t run out of money before they even ship an 18a order.
What Intel needs right now is a Christmas miracle.