After a long period of uncertainty, semiconductor giant Intel (INTC -9.20%) finally has some clarity on the amount of funding it will receive from the U.S. government to help fuel its expansion plans. Intel is set to invest more than $100 billion in the U.S. over five years in a bid to retake manufacturing leadership and grow into the world's second-largest foundry.
The CHIPS and Science Act, which was signed into law in August 2022, set aside tens of billions of dollars for subsidies to revitalize and strengthen the U.S. semiconductor industry. That money has flowed at a slow trickle until now, contributing to delays in projects that are already underway.
In February, it was reported that Intel was postponing one of its big U.S. projects partly due to the lack of government funding. Intel's $20 billion project in Ohio, which includes two leading-edge chip factories, was originally set to come on line in 2025. Construction is now reportedly scheduled to drag on through most of 2026.
Funding has finally arrived
On Wednesday, Intel announced that it had reached a preliminary agreement with the U.S. Department of Commerce and the Biden administration that will deliver $8.5 billion in direct funding for its U.S. semiconductor projects. In addition to those grants, Intel will have the option to draw from $11 billion in federal loans.
On top of the nearly $20 billion of capital available to Intel through grants and loans, the company is also eligible for substantial tax credits. Intel plans to claim the U.S. Treasury Department's Investment Tax Credit, which the company expects to be worth up to 25% of the $100 billion in investments it plans to make over five years.
This funding will go toward the Ohio project, as well as major projects in Arizona, New Mexico, and Oregon. The preliminary deal removes much of the uncertainty surrounding federal funding for Intel's vast U.S. investments.
Intel's manufacturing renaissance takes shape
Intel expects to regain the manufacturing lead over foundry market leader Taiwan Semiconductor Manufacturing in 2025 with its advanced Intel 18A process node. Intel 18A will feature a new type of transistor, as well as backside power delivery, a technology that can boost performance and efficiency. TSMC isn't expected to implement backside power delivery until 2026.
The federal funding and incentives Intel is set to receive will aid the company as it builds out its capacity for Intel 18A and future process nodes. The chipmaker has so far racked up $15 billion in total deal value for its foundry, most of which won't start to be converted into revenue until next year as production ramps up. The most notable customer so far is Microsoft, which will use Intel 18A for an undisclosed custom chip.
Intel's overall manufacturing capacity is set to ramp up dramatically in 2026 and beyond as Intel 18A comes into its own. The company also plans to begin initial production on its more advanced Intel 14A node in 2026, with Intel 10A following in 2027. It will also offer foundry customers refined versions of Intel 18A and Intel 3 as time goes on.
While it will take time for Intel to build out manufacturing capacity and begin recognizing meaningful revenue from its foundry customer wins, the company appears to be on track. If Intel can truly regain manufacturing leadership in 2025 and then hold onto it as it competes with TSMC, more big-name customers are likely to follow Microsoft in choosing Intel 18A and future process nodes.
With the federal funding picture now clear, one of the big uncertainties around Intel's long-term foundry ambitions has been removed.
