Intel’s huge investment in chip-manufacturing capacity has been controversial but it could be about to get a boost. The company is first in line for a potential multibillion-dollar funding package from the government to make microchips for military applications.
Intel
(ticker: INTC) is the leading candidate to receive funds for secure chip-manufacturing facilities that would reduce U.S. military dependence on imports from Asia, and particularly Taiwan, according to The Wall Street Journal, which cited people familiar with the matter.
Intel declined to comment on the report. The stock was up 0.7% in early trading.
A U.S. government funding award would be an endorsement for CEO Pat Gelsinger’s plan to promote the company as a domestic alternative to
Taiwan Semiconductor Manufacturing
(TSM), the world’s largest contract chip maker.
American depositary receipts of Taiwan Semi were down 0.5% in early trading.
Intel said in 2021 that it would invest more than $43.5 billion in new manufacturing capacity across Arizona, New Mexico, and Ohio. While the expansion has taken its toll on margins, analysts generally applauded Intel’s most recent earnings given signs that its chip-manufacturing business was beginning to attract more clients.
CFRA analyst Angelo Zino wrote at the time that part of Intel’s strategy was to offer a “geopolitical hedge” against concerns over China’s actions toward Taiwan, which the Chinese government regards as a breakaway province that it intends to unify with the mainland.
The overall size of any funding award has yet to be decided but the secure chip-making facilities could cost $3 billion to $4 billion overall, according to the Journal. The Biden administration’s Chips Act authorized $39 billion of manufacturing grants in total.
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