Intel will receive $3.5 billion in subsidies for the implementation of a project to produce chips for the defense industry in the United States

One of the serious arguments in favor of the US authorities subsidizing the construction of new enterprises by Intel in the country was their potential ability to produce advanced chips for defense systems. According to preliminary data, the company managed to agree on receiving $3.5 billion from the state purely for the implementation of this project.

Image Source: Intel

The initiative, known as the Secure Enclave, as understood by the US Department of Defense, involved Intel establishing several production lines in four states (Ohio, Arizona, Oregon and New Mexico) where it would produce and package advanced chips for defense customers. The latter impose specific requirements on production conditions and the products themselves, so participants in such initiatives sometimes have to work almost at a loss while fulfilling defense orders, as noted by experts interviewed by Bloomberg.

Intel has not yet received guarantees that the funds will be allocated to it, but a preliminary agreement has already been reached. This could be officially announced as early as next week. These funds are not included in the $8.5 billion in subsidies and $11 billion in soft loans that are intended to expand Intel production sites in the United States as part of the so-called “Chip Act.” Initially, the US Department of Defense was supposed to allocate $2.5 billion from its own funds for core needs, and the Department of Commerce would add another $1 billion, but during the discussion the entire budget was assigned to the latter department, and with the condition of its separation from the general Intel subsidy program amount of $19.5 billion.

Attempts to cover the needs of the defense industry through contracts with foreign chip manufacturers that build their factories in the United States (TSMC and Samsung) were also rejected by lobbyists from the defense-industrial complex. In this regard, Intel stands out from its competitors in that it is a truly American company. Along the way, Bloomberg clarifies that US Secretary of Commerce Gina Raimondo failed to convince large chip developers like AMD and Nvidia to entrust the production of their advanced components to Intel at future facilities in Ohio. At least so far, none of Intel’s competitors have demonstrated any such intentions, and only Microsoft Corporation has become more or less interested in the capabilities of this company.

The redistribution of funds in favor of Intel hit the interests of other American companies. Chip manufacturing equipment manufacturer Applied Materials has lost support for its $4 billion R&D project in California. Legislators’ attempts to increase subsidies under the Chips Act by $3 billion have not found support in Congress. With all this, Intel is currently not in the best financial shape, and the company is expected to have to abandon the implementation of large projects outside the United States in order to save money.