White House proposes up to $8.5B to fund Intel’s domestic chip manufacturing

Well before President Joe Biden signed the CHIPS and Science Act into law back in August 2022, Intel has been a cornerstone of U.S. efforts to increase domestic chip manufacturing. This morning, the White House announced an agreement with the Department of Commerce that would deliver the silicon giant up to $8.5 billion to shore up U.S.-based production.

The CHIPS Act can be seen as a direct result of a number of pressing geopolitical issues. The first is the supply chain bottleneck that has been an ongoing issue since Asia was hit hard by the earliest days of the pandemic. The second is the simmering tension between the U.S. and China that reached a fever pitch under the previous administration and has continued to simmer under the current.

Asia — specifically Taiwan — continues to produce the lion’s share of the world’s semiconductors. Between the densely populated East Asian country’s semiconductor behemoth TSMC and the massive amount of manufacturing that happens in Chinese cities like Shenzhen, major industries ranging from smartphones to automotive were brought to a virtual standstill amid early lockdowns.

The above, coupled with long-standing efforts to revitalize U.S. industry, spurred on economic efforts to reshore manufacturing. Intel, which ceded much of the smartphone industry to the competition, was eager to become a proactive participant. While the CHIPS Act was still winding its way through Capitol Hill, Intel announced plans to open a $10 billion manufacturing facility just outside of Columbus, Ohio. It was a high-ticket show of faith in not only U.S. manufacturing capabilities, but also the growth of tech scenes outside the usual hubs of San Francisco and New York.

Intel adds that it expects to invest 10x that over the next half decade, with its eyes set on Arizona, New Mexico and Oregon, in addition to Ohio. It says it expects those efforts will create 20,000 construction and 10,000 manufacturing jobs — music to the ears of an administration keenly focused on monthly jobs reports.

There’s also the added incentive of having a U.S.-based company making products in the U.S., which can alleviate bottlenecks by moving manufacturing closer to the point of consumption. All of these points are ones an incumbent can potentially hang their hats on in an election year.

“With this agreement, we are helping to incentivize over $100 billion in investments from Intel — marking one of the largest investments ever in U.S. semiconductor manufacturing, which will create over 30,000 good-paying jobs and ignite the next generation of innovation,” U.S. Secretary of Commerce Gina Raimondo notes in a release.

The question of whether the U.S. government is doing enough to level the playing field between domestic chip companies and the competition is another entirely. Many industry experts I’ve spoken to over the past few years have suggested that, while these initiatives are a good start, they don’t do nearly enough to cover the gap between U.S. manufacturing and the head start enjoyed by the likes of TSMC. One also has to account for the amount of time it will take many of these factories to come online.

Notably, Intel recently pushed back the manufacturing start date of its New Albany, Ohio, plant two years to 2027, citing changes to the business environment. As of the report, the company has spent $1.5 billion and had “69 employees from 14 Ohio counties working at the project site, and construction workers from 75 of Ohio’s 88 counties have contributed to the project to date.” Not the sorts of figures that are moving the needle on jobs reports just yet.

Additional sites are planned for Chandler, Arizona; Rio Rancho, New Mexico; and Hillsboro, Oregon.