Intel's financial struggles threaten Biden admin chip strategy
The Biden administration's plan to revitalize the U.S. semiconductor industry is facing doubts over its success as Intel — the company the government is relying heavily on to deliver its goals — continues to struggle.
The U.S.-based chipmaker was expected to be the chief beneficiary of the tens of billions in taxpayer subsidies allocated under the bipartisan CHIPS and Science Act passed two years ago. But so far, the company has not received any funds as it works to meet the government's requirements, and instead of creating the jobs promised under the policy, it has slashed its workforce by 15%.
In March, the Commerce Department announced a proposal for Intel to receive $8.5 billion in grants for its commercial semiconductor projects in Arizona, New Mexico, Ohio and Oregon.
According to Bloomberg, Intel has become "frustrated" in negotiations with the government and is urging the feds to release funds faster. The Commerce Department declined to comment on the situation.
INTEL'S MASSIVE JOB CUTS COME AFTER IT'S EXPECTED TO RECEIVE $8.5 BILLION IN TAXPAYER MONEY
An Intel spokesperson told FOX Business in a statement Wednesday, "We continue to work closely with the CHIPS office as we invest to make the U.S. the premier destination for leading-edge chip manufacturing. We are making significant progress across our U.S. projects in Arizona, New Mexico, Ohio, and Oregon, and look forward to finalizing our funding agreement soon."
Intel's stock is down nearly 60% year-to-date, after the company was dealt another blow on Wednesday. Reuters reported that, according to three sources familiar, Intel suffered a setback in its contract manufacturing with recent failures of its most advanced chip-making process.
Scott Lincicome, vice president of general economics and trade at the Cato Institute, told FOX Business in an interview that Intel's troubles go back decades, but only time will tell whether the government's major bet will pay off.
He pointed to some successes in the industrial policy initiative, noting that Taiwan-based TSMC and Korea-based Samsung have both committed to building facilities in the U.S. — but referred to the plans as "a far cry" from what the CHIPS Act promised, and noted both those firms have vowed to keep production of their most advanced chips in their respective home countries.
"There are some factories getting built, but Intel was the big play, because it's the American company that was committed to building the most advanced stuff, and since it's an American-headquartered company, there was much less risk of it pulling the plug on its promises, at least for strategic reasons," Lincicome said. But, he added, Intel's "finances are a different story."
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"I think it's undeniably true that the CHIPS Act is going to get us something," Lincicome said. "It just might be a far cry from what we thought, and particularly because Intel was so such a big part of the plan."