Blow to INTC: Denied CHIPS Act funds.
On Wed, 13 Mar 2024, the Pentagon pulled out of a plan to spend as much as US$2.5 billion on a chip grant to Intel, sources familiar with the situation said. (see below)
This puts the onus on another federal agency – the Commerce Department – to make up for the shortfall.
The move threatens to limit the total amount that Intel has been expecting to get in federal funding, setting up a contentious situation as the deliberations are private.
Beyond the defence money, Intel has been seeking incentives worth more than US$10 billion from the Chips and Science Act.
Defence funding was part of a spending package that President Joe Biden signed into law over the weekend, and it allocates US$3.5 Billion for Intel to produce advanced defence and intelligence-related semiconductors.
Commerce Department under Gina Raimondo, which disburses Chips Act grants, had previously only been responsible for Intel’s US$1 billion of the cost.
The Pentagon, which initially promised to cover the rest, scrapped that plan in the days leading up to a government funding deadline, leaving lawmakers to direct Commerce to use other Chips Act funds to make up the balance.
The shortfall is disrupting plans to distribute money from the Chips Act, a landmark piece of legislation meant to revitalise the domestic semiconductor industry.
From the money talked, it could be inferred, the change could mean a greater share of Intel’s Chips Act funds is devoted to military uses, rather than commercial ones.
The defence deal sets up Intel as a dedicated supplier of chips for military and intelligence needs, designating a so-called Secure Enclave within the company’s factory.
It is unclear whether the Secure Enclave funding will be swallowed into Intel’s total awards?
Meaning Intel gets less overall money than expected – or come on top of what Intel was already set to receive, leaving less for everyone else.
The Secure Enclave approach has rankled fellow chipmakers such as $GLOBALFOUNDRIES Inc.(GFS)$, which also is getting Chips Act funding.
Diirectly, $Taiwan Semiconductor Manufacturing(TSM)$ might be affected by Pentagon’s action.
This is because based on “original” arrangement, TSM was supposed to be the other recipient of the “bigger” allocated budget from the CHIP Act policy
Looks like everything is awry now and there will be more delays anticipated until the funding and budget issues get sorted.
Guessed this is how things get done in US, one step forward, two steps back - Hahaha!
With the onset of the news, pre-market indicators for Intel is already registering a -1.24% fall in stock price.
Looking at its past 5 days performances, it troughed on Mon, 11 Mar 2024 at $43.76 per share.
With US market ignoring the February inflation that was +0.1% higher than estimates, Intel inched higher on Tue, 12 Mar 2024.
With the negative news untimely arrival, looks like it will take something positive and impactful to turn the decline around.
Do you think the Pentagon sponsor withdrawal news will impact Intel this week?
Do you think Intel will be able to come out of this unscathed?
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