Intel pockets up to $19.5 billion of government funding for fab rollout

The government has agreed to hand over $8.5 billion in direct funding under President Biden's Investing in America Agenda. It has also offered Intel access to loans totalling $11 billion under the CHIPS for America programme.

"Today is a defining moment for the US and Intel as we work to power the next great chapter of American semiconductor manufacturing innovation," said Intel CEO Pat Gelsinger. "AI is supercharging the digital revolution and everything digital needs semiconductors. CHIPS Act support will help to ensure that Intel and the US stay at the forefront of the AI era as we build a resilient and sustainable semiconductor supply chain to power our nation's future."

In most other contexts, $19.5 billion is a huge sum of money, but when it comes to the highly intricate process of manufacturing semiconductors, it is a drop in the ocean. In September, Boston Consulting Group (BCG) estimated that to build a single chip fab in time to start production in 2026 would carry a total cost of ownership (TCO) of $35 billion-$43 billion.

"Many factors will continue to drive up the costs of these highly advanced facilities in the future, although each project will have its own unique requirements and cost considerations," BCG noted.

Nonetheless, the public funding offered by the Commerce Department is sufficient enough to give Intel the confidence to embark on its previously-announced, $100 billion spending plan for the US.

In Arizona, Intel is building two new fabs and overhauling an existing one. These facilities will produce chips based on its most advanced processor design to date, 18A.

In New Mexico, Intel plans to convert two existing fabs into packaging facilities, closing a gap in the US's semiconductor supply chain. It is also launching scholarships to support engineering students at five colleges and universities.

Ohio is getting two new fabs that will produce logic chips, while in Oregon, Intel is investing primarily in its R&D operation there.

Overall, the investment scheme is expected to create 10,000 manufacturing jobs and 20,000 construction jobs. Intel also claims it will support a further 50,000 indirect jobs with suppliers and adjacent industries.

Schemes that promise job creation during an election year always go down well with the powers that be. Couple it with the fact that the US is also determined to achieve semiconductor self-reliance, and this public funding announcement becomes the ultimate no-brainer.

"The CHIPS for America programme will bring semiconductor manufacturing back to the US and create a vital R&D ecosystem to keep it here," said under secretary of commerce for standards and technology and NIST (National Institute of Standards and Technology) director Laurie Locascio. "The innovation sparked by this proposed investment would strengthen America's technological and research leadership and significantly help enhance our nation's manufacturing capacity while strengthening communities and creating good-paying jobs."

Intel isn't solely focused on the US, of course. It is also ploughing €33 billion into its European operations, most of which is being spent on a new fab in Germany. As is the case in the US, public funds played a pivotal role in encouraging Intel to turn on its money hose – the EU is giving Intel billions of euros in subsidies as part of its €43 billion Chips Act.

It's a lot of money, but with McKinsey predicting that global semiconductor revenue will reach $1 trillion a year by the end of the decade, this is money well spent.