Intel, which once led the semiconductor industry, has recently encountered notable challenges. With stability issues affecting its 13th and 14th Gen chips and competition from AMD’s powerful CPUs, it is facing an uphill battle. The company is reported to have 18 months to secure a significant client for its 14A architecture or risk its manufacturing facilities falling behind.
In a new development, the US government has negotiated a deal to acquire a 10% stake in Intel in return for financial support stemming from a total of $8.9 billion from federal grants as part of the 2022 CHIPS Act. Should Intel fail to retain at least 51% of its foundry operations over the next five years, the government can purchase an additional 5% of the company at $20 per share.
Intel’s shares are currently trading just below $24, significantly lower than previous highs of $50 in late 2023 and $70 in January 2020. The potential for the government to purchase shares if Intel loses control of its manufacturing could lead to federal ownership of nearly 4.3 billion shares of Intel stock, positioning the US government to buy at around $4.3 billion if these conditions manifest.
David Zinsner, Intel’s CFO, expresses confidence that the company will retain its majority share in the foundry business, emphasizing alignment with the government’s intent to maintain domestic production. This strategic partnership aims to reinforce Intel’s industry position amid market uncertainty. Ex-CEO Craig Barrett criticized the current CEO’s strategy, stating that significant investment is crucial for Intel to remain competitive against rivals like TSMC. He insists that Intel needs a capital boost, estimating $40 billion as necessary for future operations.
Overall, as Intel grapples with internal and external pressures, the collaboration with the US government may play a pivotal role in its attempts to regain a competitive edge in the semiconductor industry. The outcome of this support and its effect on Intel’s stock will be closely observed in the coming years.
Intel
Image credit: Intel
