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Intel CEO is "frustrated" with CHIPS Act payout progress — Intel has received $0 from the $8.5 billion that the US government promised

XYang2023

Well-known member
Pat Gelsinger

(Image credit: Tom's Hardware)

Intel CEO Pat Gelsinger has been frustrated with the U.S. government’s slow progress in providing Intel with its promised CHIPS Act funding. The New York Times shared recent interviews with Gelsinger and U.S. Secretary of Commerce Gina Raimondo about the CHIPS and Science Act.

The Biden-backed CHIPS Act represents $280 billion of funding for semiconductor manufacturing in the United States, giving the Commerce Dept. the ability to provide 10-figure grants and loans to companies like TSMC and Intel to supercharge a young U.S.-based chip industry. The Biden administration has promised Intel $8.5 billion in direct funding to build its new chipmaking fabs (plus $11 billion in loans and a 25% investment tax credit of up to $100 billion). Still, the company has not seen any of these funds so far.

Missing the funds is a problem for Intel, which is in turmoil due to $1.6 billion in losses in Q2 2024. Intel is cutting 15% of its workforce, representing 15,000 or more workers worldwide. Gelsinger has spent the past three months since the disastrous August earnings call restructuring his company and placating stockholders. He has become “frustrated” with the roadblocks the government has put in between Intel and its CHIPS Act funds.

“My simple message is, ‘Let’s get it finished,’” said Gelsinger in an interview. “There’s been renegotiations on both sides.” The U.S. government put some objectives between CHIPS Act recipients and their money, with milestones including completing building projects, securing customers, etc. “Obviously, with elections, you know, nigh in front of us, hey, we want this done,” said Gelsinger, with the possibility of a new presidential regime lighting a fire of urgency.

This reticence to give out CHIPS Act funding right away apparently stemmed from fears from the government that Intel specifically would not meet its promises. “[There is fear that] Intel is going to take chips money, build an empty shell of a factory and then never actually open it, because they don’t have customers,” said former Commerce Department official Caitlin Legacki.

Gelsinger’s tenure as CEO since 2021 has been marked by a desire to rebuild the company in a foundry-forward direction. One of the major forces behind lobbying for the CHIPS Act, Gelsinger also supercharged the Intel Foundry division, which, despite its extremely high costs, has been deemed crucial for Intel's long-term success. The foundry is set to be spun off into an independent subsidiary, with its overseas operations paused for the next two years while its U.S. facilities are prioritized.

According to reports from last month, Intel is set to receive its first round of CHIPS Act funds before the end of 2024. Gelsinger, as mentioned above, is anxious to receive funds before the election, and Qualcomm is reportedly waiting until the election to make a move on purchasing Intel assets.

https://www.tomshardware.com/tech-i...com&utm_medium=social&utm_campaign=socialflow
 
I honestly do not think Intel is in a position to make these statements. I know the politicians tried to push the money out before the election but that did not happen. I'm looking into the reason why, just as Pat could, and I can assure you I will find out just as Pat could too. He either does not want to know or he does know and does not like the answer. Either way he should keep his mouth shut.
 
This is the government after all. They are never quick at disbursing money.
That said I do understand his issue. The next government might come in and just cancel the whole thing.

But I think that is unlikely, even with Trump being POTUS, he wants American manufacturing.
 
This is a very political topic and I should probably stay away from this, since I'm not even a US citizen... I must say that I understand Pat and I'm also very disappointed with how US government is treating science and technology in general (it's also reflected in NASA's budget). There are massive amounts of money going into war (defense if you wish) industry, Ukraine and Israel, and they are quick to push these funds through. If only there was such an initiative to help tech industry and a fraction of the money that goes to weapons industry, went to tech industry instead (not just Intel in particular).
This is just how it looks from an outsider view, might be wrong.
 
This is a very political topic and I should probably stay away from this, since I'm not even a US citizen... I must say that I understand Pat and I'm also very disappointed with how US government is treating science and technology in general (it's also reflected in NASA's budget). There are massive amounts of money going into war (defense if you wish) industry, Ukraine and Israel, and they are quick to push these funds through. If only there was such an initiative to help tech industry and a fraction of the money that goes to weapons industry, went to tech industry instead (not just Intel in particular).
This is just how it looks from an outsider view, might be wrong.
You're correct, and I don't think this is controversial.

While the USA's military spending does have *some* "benefits" to science and technology here, it's still a very closed process and the companies that take the majority of contract $'s don't also develop things that help the consumer or "normal civilian". Also, the $1T or so the Fed Govt reports for Military spending is huge, it's only the tip of the iceberg - there are plenty of "black" (off the books) projects that don't have official funding sources.

See "Military Industrial Complex" for more on how this looping of increasing spend on Defense in the USA occurs.
 
If I was promised billions I’d be disappointed if I didn’t get it too, as should they get it for screwing up the last decade and half I’d say maybe, show me you have changed. Put in key milestones for the tax payer money.

I guess far cheaper to throw a few billion at Intel and some more at TSMC and hope CCP doesn’t decide to blockade Taiwan for access to EUV, advanced process tools and TSMC capacity.
 
This is the government after all. They are never quick at disbursing money.
That said I do understand his issue. The next government might come in and just cancel the whole thing.

But I think that is unlikely, even with Trump being POTUS, he wants American manufacturing.
Maybe there will be some change.

 
This is the problem with support through direct funding. If the support was in the form of tax incentives and/or reduced tariffs and possibly rebates for purchase of raw materials, there would be no delays with receiving the help required. This approach ensures that any company receiving aid put their money into the pot upfront and is rewarded by relief of their tax burden or simply reduced cost of goods as the government takes less of a bite out of the pie.
 
If I was promised billions I’d be disappointed if I didn’t get it too, as should they get it for screwing up the last decade and half I’d say maybe, show me you have changed. Put in key milestones for the tax payer money.

I guess far cheaper to throw a few billion at Intel and some more at TSMC and hope CCP doesn’t decide to blockade Taiwan for access to EUV, advanced process tools and TSMC capacity.

"If I was promised billions I’d be disappointed if I didn’t get it too,..."

Intel has not yet been promised the money. The following is from the March 20, 2024 announcement by the U.S. Commerce Department (bold text are modified by me):

"Today, the Biden-Harris Administration announced that the U.S. Department of Commerce and Intel Corporation have reached a non-binding preliminary memorandum of terms (PMT) to provide up to $8.5 billion in direct funding under the CHIPS and Science Act to strengthen the U.S. supply chain and re-establish American leadership in semiconductor manufacturing"

"As explained in its first Notice of Funding Opportunity (NOFO), the Department may offer applicants a PMT on a non-binding basis after satisfactory completion of the merit review of a full application. The PMT outlines key terms for a CHIPS incentives award, including the amount and form of the award. The award amounts are subject to due diligence and negotiation of a long-form term sheet and award documents and are conditional on the achievement of certain milestones and remain subject to availability of funds. After the PMT is signed, the Department begins a comprehensive due diligence process on the proposed projects and continues negotiating or refining certain terms with the applicant. The terms contained in the long-form term sheet and the final award documents may differ from the terms of the PMT being announced today."


As we can imagine, for $8.5 billion in grants, plus additional tax credits and billions in low-interest loans, there are many terms, agreements, milestones, and deliverables that need to be set and verified.
 
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Maybe there will be some change.

Damn. What a load of crap.
 
I honestly do not think Intel is in a position to make these statements. I know the politicians tried to push the money out before the election but that did not happen. I'm looking into the reason why, just as Pat could, and I can assure you I will find out just as Pat could too. He either does not want to know or he does know and does not like the answer. Either way he should keep his mouth shut.

CHIPS Act grant money is taxpayer money, not an equity investment in Intel, and it is certainly not bailout money. Congress, the Commerce Department, and the White House must remain vigilant and execute this program effectively to achieve policy goals. Meanwhile, Intel and Pat Gelsinger are facing issues that only they can address or clarify.
  1. 1. Does Intel or Pat Gelsinger truly understand what’s happening within the semiconductor industry and even within Intel itself? Or have they failed to disclose the full situation to the government? Intel and Gelsinger appear to have been caught off guard by Intel's revenue decline and worsening financial position over the past several quarters. If I recall correctly, in 2023, Pat predicted that Intel’s business would improve in 2024, thanks to AI PCs. Unfortunately, this has not been the case, despite the semiconductor industry performing well in 2024. If Intel and Gelsinger can’t accurately assess their own situation, how can the U.S. government trust that Intel’s business strategy and planning are sound?

  2. 2. Did Intel shift excessive costs and expenses from its Product/Design division to its Manufacturing Division (Intel Foundry) to make the Product/Design division appear more profitable and justify the grant request? Could CHIPS Act funds ultimately inflate Intel's Product/Design division’s profitability and competitiveness artificially?

  3. 3. Intel’s upcoming Fabs 52 and 62 in Arizona are now jointly owned by Intel (51%) and private equity firm Brookfield (49%), while Intel’s most advanced and operational Fab 34 in Ireland is co-owned with Apollo, another private equity firm. In both cases, Brookfield and Apollo are guaranteed an undisclosed investment return. This setup goes beyond a typical shareholder or equity investment arrangement. How can Intel assure the government that CHIPS Act funds won’t end up as guaranteed profits flowing to Brookfield or Apollo?

  4. 4. On March 20, 2024, Intel and the U.S. Commerce Department announced a non-binding Preliminary Memorandum of Terms (PMT) to provide up to $8.5 billion in direct funding under the CHIPS Act. This proposed funding supports Intel’s previously announced commitment to invest over $100 billion in the U.S. over five years, expanding domestic chipmaking capacity critical to economic and national security and accelerating emerging technologies like AI. Intel’s investments are expected to create more than 10,000 company jobs, nearly 20,000 construction jobs, and support over 50,000 indirect jobs with suppliers and supporting industries.
However, on August 1, 2024, less than six months after this announcement, Intel began laying off over 15,000 employees and implementing $10 billion in expense cuts. This reduction means Intel is cutting 15,000 employees - 5,000 more than the 10,000 new jobs it was supposed to create due to the CHIPS Act subsidy. Did Intel mislead the U.S. government in its grant application, or is Pat Gelsinger out of touch with Intel’s internal situation?

*** Added below #5 at 10:52PM 10/27/2024

5. In August 2024, Intel disclosed that it had moved all Intel 3 and Intel 4 production from Oregon to its Ireland fabs to reduce costs and improve long-term efficiency. I believe the U.S. government would certainly want to understand the reasons behind this decision and seek assurances from Intel that such relocations won’t happen again. Otherwise, it makes little sense for the government to continue granting taxpayer funds to Intel while Intel shifts production and jobs to foreign countries.

It seems likely that the U.S. government is growing frustrated with Intel’s truthfulness and credibility, especially as Pat Gelsinger criticizes delays in taxpayer funding to Intel.
 
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CHIPS Act grant money is taxpayer money, not an equity investment in Intel, and it is certainly not bailout money. Congress, the Commerce Department, and the White House must remain vigilant and execute this program effectively to achieve policy goals. Meanwhile, Intel and Pat Gelsinger are facing issues that only they can address or clarify.
  1. 1. Does Intel or Pat Gelsinger truly understand what’s happening within the semiconductor industry and even within Intel itself? Or have they failed to disclose the full situation to the government? Intel and Gelsinger appear to have been caught off guard by Intel's revenue decline and worsening financial position over the past several quarters. If I recall correctly, in 2023, Pat predicted that Intel’s business would improve in 2024, thanks to AI PCs. Unfortunately, this has not been the case, despite the semiconductor industry performing well in 2024. If Intel and Gelsinger can’t accurately assess their own situation, how can the U.S. government trust that Intel’s business strategy and planning are sound?

  2. 2. Did Intel shift excessive costs and expenses from its Product/Design division to its Manufacturing Division (Intel Foundry) to make the Product/Design division appear more profitable and justify the grant request? Could CHIPS Act funds ultimately inflate Intel's Product/Design division’s profitability and competitiveness artificially?

  3. 3. Intel’s upcoming Fabs 52 and 62 in Arizona are now jointly owned by Intel (51%) and private equity firm Brookfield (49%), while Intel’s most advanced and operational Fab 34 in Ireland is co-owned with Apollo, another private equity firm. In both cases, Brookfield and Apollo are guaranteed an undisclosed investment return. This setup goes beyond a typical shareholder or equity investment arrangement. How can Intel assure the government that CHIPS Act funds won’t end up as guaranteed profits flowing to Brookfield or Apollo?

  4. 4. On March 20, 2024, Intel and the U.S. Commerce Department announced a non-binding Preliminary Memorandum of Terms (PMT) to provide up to $8.5 billion in direct funding under the CHIPS Act. This proposed funding supports Intel’s previously announced commitment to invest over $100 billion in the U.S. over five years, expanding domestic chipmaking capacity critical to economic and national security and accelerating emerging technologies like AI. Intel’s investments are expected to create more than 10,000 company jobs, nearly 20,000 construction jobs, and support over 50,000 indirect jobs with suppliers and supporting industries.
However, on August 1, 2024, less than six months after this announcement, Intel began laying off over 15,000 employees and implementing $10 billion in expense cuts. This reduction means Intel is cutting 15,000 employees - 5,000 more than the 10,000 new jobs it was supposed to create due to the CHIPS Act subsidy. Did Intel mislead the U.S. government in its grant application, or is Pat Gelsinger out of touch with Intel’s internal situation?

It seems likely that the U.S. government is growing frustrated with Intel’s truthfulness and credibility, especially as Pat Gelsinger criticizes delays in taxpayer funding to Intel.
Having discussions like these only highlights how the U.S. is not competitive with China (except when it comes to tech restrictions). Intel has already committed to significant long-term investments in fabs and process developments, which have strained its financials. As a company, Intel needs to manage its cash flows carefully. When you compare $8.5 billion to the amount of money wasted on the Ukraine war, EV subsidies (such as building charging stations), and other initiatives, it just doesn't make sense to me.

You can literal see how Intel is spending its resources at the moment. What else do you want??? More DEI???


PS
"Biden’s $7.5 billion investment in EV charging has only produced 7 stations in two year"
 
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