Intel scores $8.5B in government cheddar to supercharge fab builds

Department of Commerce says it's the largest such investment in US semiconductor manufacturing

Intel is set to grab up to $8.5 billion in direct funding and up to $11 billion in loans from the US government under the CHIPS and Science Act to help build out its semiconductor manufacturing capacity.

The award comes circa 18 months after the legislation was signed into law by President Biden, and the Department of Commerce announced today that it has reached a non-binding preliminary memorandum of terms (PMT) with the Santa Clara chipmaker to unlock the cash, intended to strengthen the domestic supply chain and regain US leadership in semiconductors.

Intel reportedly plans to invest more than $100 billion into building new semiconductor facilities in the US alone over the next five years at sites in Arizona, New Mexico, Ohio, and Oregon. Washington's contribution will only be a fraction of this total investment, though the Department of Commerce said it still stands out as one of the largest ever announced in US semiconductor manufacturing.

"This announcement is the culmination of years of work by President Biden and bipartisan efforts in Congress to ensure that the leading-edge chips we need to secure our economic and national security are made in the US," Secretary of Commerce Gina Raimondo said in a statement.

Intel also indicated it is planning to claim the Department of the Treasury's Investment Tax Credit, which is expected to be up to 25 percent of qualified capital expenditures.

"Today is a defining moment for the US and Intel as we work to power the next great chapter of American semiconductor manufacturing innovation," Intel CEO Pat Gelsinger commented.

This is the fourth PMT signed by the Department of Commerce so far following GlobalFoundries, Microchip Technology, and BAE Systems. Announcements are still expected to allot funding to TSMC and Samsung for fabs hosted on US soil.

Intel said the funding will go towards two new leading-edge logic fabrication plants and modernization of an existing site in Chandler, Arizona, where it intends to start production of its first product called Clearwater Forest on the Intel 18A process node.

News broke this week of delays in building support facilities for Intel suppliers in the region.

The funds are also set to go towards building another pair of leading-edge logic factories in New Albany, Ohio; modernization of two fabs into advanced packaging facilities in Rio Rancho, New Mexico; and expansion and modernization of Intel's Hillsboro, Oregon site to include the world's first High NA EUV lithography equipment, needed for future advanced process nodes such as Intel 14A.

The cost of building a fab to support EUV (extreme ultraviolet) lithography was one of the reasons Intel previously decided to divide the company into foundry and chip design divisions, and open up its fabs for other chip companies to use.

"It's a lot more expensive to build a fab, an EUV fab, than it was to do a pre-EUV fab," Intel CFO David Zinsner said in an interview at the Morgan Stanley Technology, Media & Telecom Conference earlier this month. "And it requires a fair amount of wafer volume to get your return on one of those fabs.

"I think it's unlikely that we would have enough volume ourselves to be able to fill the fabs to the level that drives enough of an ROI. So part of it is just necessity. We need more volume, and that's going to have to come from other customers."

This is already proving to be beneficial, he claimed, because in the foundry space "you get a lot of feedback from your customers that helps you make better transistors, but also better transistors at very effective cost."

On the production process side, Zinsner said the company has almost succeeded in delivering its goal of five nodes in four years. Intel 7 (10nm) is in volume manufacturing, and "we're largely through Intel 4 now. Intel 3 is not too far away at this point with Sierra Forest, which will qualify in the first half of this year, and then we've got 20A and 18A coming and both of those look pretty good," he claimed.

But there are further spending cuts to come, Zinsner warned. "We cut $3 billion of spending out last year. We're going to chip away at trying to drive efficiencies this year. Ultimately, we want to be pulling out another $5 billion to $7 billion of spending efficiencies to help improve the cash flow as well," he said.

Zinsner also confirmed that he and Gelsinger will hold a webinar in early April that will further discuss how Intel plans to segment its business into foundry and chip design divisions. ®

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