Funds Acquired: $5.7 billion, Stock Shares Increased
In a significant move to bolster domestic semiconductor production, the U.S. government has invested around $13 billion in Intel, acquiring a 9.9% stake in the tech giant. This investment, primarily from the CHIPS and Science Act, was supplemented by $2 billion from SoftBank, a Japanese investor.
The funds were not obtained through the selling of existing shares, but rather in the form of new shares issued to the U.S. government. As part of the agreement, Intel will issue approximately 433 million new shares.
The details of the milestones that Intel must achieve to receive the remaining funds have not been disclosed. However, it is understood that these milestones may include establishing manufacturing capacity and timely availability of new manufacturing processes.
The U.S. government's stake gives it the right to purchase an additional 5% of the remaining company at a favourable price if Intel's ownership drops below 51%. This clause, which allows the government to maintain its significant influence, was a part of the agreement.
Despite initial concerns, the agreement has been considered advantageous for Intel. The company, which has been posting quarterly losses for its chip division since it started purchasing chips at industry-standard prices, hopes to turn things around with the investment.
Intel is also seeking additional investors for its chip manufacturing division, Intel Foundry. The company aims to attract more customers with the 14A manufacturing generation, a significant advancement in chip production.
The recent investment comes at a time when Intel has delayed or halted the construction of new semiconductor factories due to financial constraints. The funds from the U.S. government and SoftBank are expected to alleviate some of these constraints.
In addition to the funds, Intel's Chief Financial Officer, David Zinsner, has received $5.7 billion from the U.S. government. The U.S. government also has the right to claw back previously disbursed $2.2 billion, but has now waived this clause.
The automotive division Mobileye is also expected to contribute $1 billion to the total investment, through a partial sale. Intel does not plan to completely divest the foundry, indicating a continued commitment to its chip manufacturing division.
The U.S. government's stake now stands at 9.9%, a significant increase from its previous position. This investment is part of a larger strategy to strengthen domestic semiconductor production and ensure U.S. technological independence.
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