Trump connects Intel to an unfavorable arrangement.
In a significant move, the US government has announced that it will take a 10% equity stake in Intel, following a deal struck last week. The investment comes as the tech giant looks to compete in the global semiconductor market, where it has struggled to compete meaningfully with foundry specialists like Taiwanese market leader TSMC and attract orders from designers like Nvidia or Qualcomm.
The government's involvement in Intel has been a topic of discussion, as it has complicated the sale of Intel's foundry business and the search for strategic private investors. The investment required to keep this platform in-house is too large for Intel, and the company has been seeking a major customer to use its next-generation 14A manufacturing process.
According to Intel's Chief Financial Officer, David Zinsner, the government has converted $8.9 billion in subsidies from the Chips Act into a direct 10% equity stake in Intel. In return, Intel received $5.7 billion in cash as part of this deal. The agreement also includes an option for the U.S. to acquire an additional 5% stake in Intel over the next five years, contingent on Intel spinning off a majority of its foundry business.
However, the U.S. government's stake in Intel is structured in a way that discourages the company from spinning off its foundry business, a move that Citigroup and other Wall Street firms have been pushing for. If Intel fails to find a mass customer for its foundry division, it could significantly burden the return for shareholders, as the foundry division posted an operating loss of $2.8 billion in the second quarter of 2025, with a net loss of $2.9 billion for the same period.
The deal between Washington and Intel marks a shift in US government policy, with President Donald Trump's new form of state capitalism raising concerns among the traditionally economically liberal Republican base. Trump's interventionist policies have left some bewildered, as the number of global mergers fell by 9% in the first half of 2025 due to uncertainty caused by repeated government interventions.
Despite these challenges, Zinsner remains optimistic, stating that he does not believe there's a high probability that Intel's stake will be reduced to less than half, implying the government's option may expire unexercised. As Intel continues its search for a major customer for its foundry division, the future of the company remains uncertain, but the government's investment provides a glimmer of hope for a stronger US position in the global semiconductor market.
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