In a strategic move to bolster domestic semiconductor manufacturing, the Trump administration has structured its recent agreement with Intel to prevent the company from divesting its foundry business unit. This decision underscores the administration’s commitment to maintaining and enhancing the United States’ position in the global semiconductor industry.
Intel’s Chief Financial Officer, David Zinsner, provided insights into the agreement during a Deutsche Bank conference. He revealed that the deal includes a five-year warrant allowing the U.S. government to acquire an additional 5% stake in Intel at $20 per share if the company’s equity in its foundry business falls below 51%. This clause effectively discourages Intel from spinning off or selling its foundry unit. Zinsner stated, I think from the government’s perspective, they were aligned with that; they didn’t want to see us take the business and spin it off or sell it to somebody.
The agreement also facilitated a $5.7 billion cash infusion to Intel, derived from previously awarded but unpaid grants under the U.S. CHIPS and Science Act. This financial support aims to strengthen Intel’s manufacturing capabilities within the United States.
The administration’s insistence on retaining the foundry unit aligns with its broader objective of reducing reliance on foreign semiconductor manufacturing, particularly from companies like Taiwan Semiconductor Manufacturing Company (TSMC). By ensuring Intel maintains control over its foundry operations, the government seeks to secure a stable and domestically controlled supply chain for critical technologies.
However, this mandate presents challenges for Intel. The foundry unit reported an operating loss of $3.1 billion in the second quarter, raising concerns among analysts and investors about its financial viability. There have been discussions about spinning off the struggling unit, especially after the sudden retirement of former CEO Pat Gelsinger in December.
Despite these challenges, the administration’s directive reflects a strategic decision to prioritize national security and technological independence over immediate financial considerations. By keeping the foundry unit under Intel’s control, the U.S. government aims to foster innovation and resilience in the domestic semiconductor industry.
