Pentagon said to have pulled $2.5B Intel defense chips grant

Plus: Trump reportedly gave chipmaker license to sell to Huawei back in the day...

Updated The Pentagon has reportedly declined to grant $2.5 billion to Intel for the production of defense-related semiconductors, which could leave the Department of Commerce to foot the entire bill.

The Santa Clara-based chipmaker was the leading candidate to receive billions from Washington for facilities to manufacture chips for US military and intelligence applications, as The Register reported last year.

As recently as last week, it was widely expected that Intel was about to be given the nod to a total of $3.5 billion of funding, ultimately from the CHIPS Act pot, to setup a dedicated production line for military chips.

However the Pentagon got last minute cold feet and declined to stump up its $2.5 billion share of this funding for Intel, at least according to Bloomberg, which cited unnamed sources that do not wish to be identified.

We asked both Intel and the US Department of Defense for comment, and will update if we get an answer.

The Department of Commerce, which was to provide $1 billion of the funding to Intel, is understood to have been instructed by Washington to make up the difference. This could mean that the amount may have to be swiped from CHIPS Act funding that would otherwise have gone to other projects.

It isn't clear from reports if the Pentagon intends to award some or all of the $2.5 billion sum to other semiconductor companies, or if it has simply decided there are more pressing uses for the funding.

Secret fabs

As previously reported, the funding is to support production of military-grade chips in a "secure enclave", which is understood to mean they will be made on a separate production line with restricted access, possibly at Intel's Arizona campus, which the chipmaker already has plans to expand.

The intended purpose is ensure access to advanced chips that the US military needs, and also to address concerns that America is too dependent on silicon produced in other countries, particularly Taiwan.

That $3.5 billion is likely to be just part of the CHIPS Act funding that Intel will receive, with the total expected to be well in excess of $10 billion in grants and loans from the Department of Commerce to help finance projects such as new fabrication plants.

Home and Huawei

At the same time, it also emerged this week that Intel was allowed to continue to sell laptop processors to sanctioned Chinese technology giant Huawei.

The chipmaker was granted a license to sell to Huawei during Trump’s presidency, according to Reuters, and the current administration has been under pressure to revoke it.

This pressure is said to be coming from rival chipmaker AMD, which regards it as an unfair advantage, as well as from those that want to see all ties cut between Huawei and US companies.

The trade was said to be worth hundreds of millions of dollars, which AMD was deprived of a share of. It also looks bad when the US has been pressuring allied nations to sever ties with Huawei over the past several years. ®

Updated to add:

A Pentagon spokesperson told The Reg: "We are committed to ensuring the Department of Defense has access to secure microelectronics, and will continue collaborating across the interagency on this critical national security priority.

"As we saw earlier this week, the President's Budget is submitted as a request to Congress, and then Congress authorizes and appropriates funding. For specific questions pertaining to the recent Fiscal Year 2024 Commerce, Justice, Science, and Related Agencies Appropriations Act, I would refer you to Congress.

"It would also be premature to speculate on either a vendor or the nature of the capability at this time."

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