US authorities announce intention to involve Intel in government operations
In the rapidly evolving semiconductor market, Intel, a tech giant, is facing challenges, particularly in the artificial intelligence (AI) and graphics card sectors. The company's plans to become a contract manufacturer for other semiconductor providers have progressed slowly, with Intel aiming to establish itself as more than just a chip producer.
Recently, the U.S. government is set to become a major shareholder in Intel, acquiring approximately 9.9% of the company through newly issued shares as part of a government-backed agreement. This investment, valued at around $10 billion (8.57 billion euros), is a quid pro quo for the billions in investments Intel has promised to expand U.S. production.
President Donald Trump believes this investment is what American taxpayers deserve, following the U.S. government's previous intervention in the takeover of American steel company U.S. Steel by Japanese rival Nippon Steel. The shares in Intel will be non-voting, and the U.S. Department of Commerce is the confirmed entity behind this investment.
SoftBank, led by Masayoshi Son, is also expanding its U.S. activities and is involved in the "Stargate" project for building gigantic data centers for AI. SoftBank is buying Intel shares at a price of $23 per share and is providing Intel with a $2 billion (1.7 billion euros) cash injection.
The investment comes as Intel is under pressure in its traditional businesses of PC processors and data center chips, and is struggling to compete with market leaders like Nvidia in the AI chip market. Intel's stock rose by more than 11 percent to around $26 in early U.S. trading on Tuesday, indicating a positive response to the news.
However, it's important to note that high-tech chips are almost exclusively produced in Asia, mainly in Taiwan, where geopolitical tensions with China exist. This investment could potentially help Intel reduce its dependency on overseas production and strengthen its position in the U.S. market.
Besides the U.S. government intervention as a major shareholder in Intel, no other specific institutions are currently publicly identified as likely additional major shareholders. The abandonment of plans for a large factory in Magdeburg due to lack of demand further underscores the challenges Intel faces in its transformation journey.
Trump has always referred to subsidies for chip companies to expand U.S. production as wasteful spending. However, with this investment, the U.S. government aims to secure Intel's future and maintain a strong position in the global semiconductor market. Trade Minister Howard Lutnick confirmed the intention in an interview with TV station CNBC.
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