U.S. Government Secures Agreement with Chip Maker
In a move aimed at bolstering the domestic semiconductor industry, the US government has agreed to invest $8.9 billion in Intel, securing a 9.9% stake in the tech giant. This decision, announced earlier this month, follows Intel's CEO, Lip-Bu Tan, meeting with President Donald Trump at the White House.
The investment, which amounts to $11.1 billion in total, comes amidst growing concerns about the decline in Intel's market share compared to foreign competitors like Taiwan Semiconductor Manufacturing Company. This deal is expected to provide American taxpayers with a discount on the current market price.
Trump initially expressed his disapproval of Intel's CEO, calling for his resignation due to alleged investments in Chinese companies. However, he later praised Tan's "remarkable story." The US involvement in Intel underscores the growing support from the White House for aggressive intervention in the private sector.
The government's investment in Intel is a passive holding, without representation on the board or other leadership rights. The US government has also agreed to align with Intel's board of directors on matters that require shareholder approval, with limited exceptions.
The production of semiconductors is challenging, especially as they become more advanced, and they are a crucial component in smartphones and AI. The global shortage of chips, exacerbated by the COVID-19 pandemic, has heightened concern that the USA is too dependent on foreign production for this backbone of modern technology.
Treasury Secretary Janet Yellen has stated that the US would not use its stake in Intel to pressure the company. Intel has received $2.2 billion in CHIPS Act subsidies, further emphasising the government's commitment to supporting the semiconductor industry.
The U.S. semiconductor industry is crucial for creating thousands of well-paying jobs, strengthening technological leadership, and protecting supply chains. Trump, despite his criticisms of the CHIPS and Science Act, has expressed a desire to increase the share of semiconductors made in the U.S.
Following President Trump's remarks about the agreement, Intel's stock price surged. This investment marks a significant step towards enhancing the US's dominance in the semiconductor industry and ensuring a more secure and self-reliant technological future.
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