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Intel clinches nearly $20 billion in awards from Biden to boost US chip output

By Alexandra Alper and David Shepardson

WASHINGTON (Reuters) – The Biden administration said it is awarding Intel nearly $20 billion in grants and loans on Wednesday, supercharging the company’s domestic semiconductor chip output and marking the government’s largest outlay to subsidize leading-edge chip production.

Biden will announce the preliminary agreement for $8.5 billion in grants and up to $11 billion in loans for Intel in Arizona, with some of the funding to be used to build two new factories and modernize an existing one.

Commerce Department Secretary Gina Raimondo called it a “huge deal” and one of the largest investments ever in U.S. semiconductor manufacturing.

“It means leading-edge semiconductors made in the United States of America,” she said on Tuesday, noting that the country’s share of leading-edge chip production is now at zero but may rise to 20% by 2030 thanks in part to the subsidy program.

The goal is to reduce reliance on China and Taiwan, as the share of global semiconductor manufacturing capacity in the U.S. has fallen from 37% in 1990 to 12% in 2020, according to the Semiconductor Industry Association.

Reuters first reported news of the trip to Arizona, a critical political swing state that Biden, who narrowly won the state in 2020, hopes to win in November in his matchup against Republican former President Donald Trump.

The historic outlay shows the Biden administration is betting big on Intel as part of the 2022 CHIPS and Science Act, a bid to boost domestic semiconductor output with $52.7 billion in funding, including $39 billion in subsidies for semiconductor production and $11 billion for research and development.

Commerce is dedicating $28 billion for government subsidies for chips manufacturing – although it has more than $70 billion in requests – and also has $75 billion in lending authority.

The announcement in Arizona could also help Democrats defend a critical U.S. Senate seat in the November elections and possibly provide a boost in a pair of competitive House of Representative races.

Arizona was a point of pride for Biden’s 2020 campaign, which flipped the southwestern state for the first time in six presidential elections, but his aides see delivering a repeat victory as a tall order.

It is also welcome news for Intel, which in January forecast first-quarter revenue could miss market estimates by more than $2 billion, as it grapples with uncertain demand for its chips used in the traditional server and personal computer markets.

Last month, the Biden administration awarded $1.5 billion to GlobalFoundries, the world’s third-largest contract chipmaker, to build a semiconductor production facility in Malta, New York, and expand existing operations there and in Burlington, Vermont.

In January, Commerce announced Microchip Technology would get $162 million in government grants, allowing the company to triple production of mature-node semiconductor chips and microcontroller units at two U.S. factories.

Awards for South Korea’s Samsung and Taiwan’s TSMC are expected in the coming weeks.

In addition to Intel’s Arizona projects, the money will help fund Intel’s delayed leading-edge factory construction project in Ohio, a nearly complete advanced packaging facility in New Mexico, and a research and development facility in Oregon.

Officials declined to detail how much money would flow to each project.

In addition to the funds slated to be announced on Wednesday, Intel is expected to receive as much as $3.5 billion from the Commerce Department to boost security at its Arizona facilities to produce sensitive chips for the military.

(Reporting by Alexandra Alper and David Shepardson; Additional reporting by Trevor Hunnicutt; Editing by Chris Sanders and Leslie Adler)

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