The United States has taken a 10% stake in the faltering American chipmaker for $8 billion. US buys Intel stake, one of Washington’s most direct interventions in the technology industry.
US buys Intel stake in $8 Billion
The deal, which reveal on Friday, follow weeks of secret negotiations between US President and Intel CEO Lip-Boo Tan. The 9.9 percent stake in Intel will be acquire by the government by purchasing 433.3 million primary shares of Intel’s common stock at a discount price of $20.47 per share.
US buys Intel Stake: How much equity?
Rather than using brand new funds. The equity stake is a conversion of existing federal grants that were previously promised to Intel. The Department of Defense has about $3.2 billion. Its Secure Enclave program and up to $5.7 billion from unpaid CHIPS Act grants. Intel has already been awarded $2.2 billion in CHIPS grants. And the government has now invested a total of $11.1 billion.
Intel CEO Pat Gelsinger state, “As the only semiconductor company that conducts cutting-edge logic R&D and manufacturing in the U.S., Intel is deeply commit to ensuring the world’s most advanced technologies are American made.”
Record-breaking investment
“The administration’s emphasis on American chip manufacturing is propelling record-breaking investments in a crucial sector that is essential to the nation’s national security and economy. We are appreciative of the President and Administration’s trust in Intel and eager to continue advancing American manufacturing and technology leadership.
Even though the U.S. government owns almost 10% of the business. It will not have any governance or information rights or be represents on the board. It will, however, be grant a five-year warrant to purchase an additional 5% of Intel stock at the same $20 price. Which will only be exercise in the event that Intel loses at least 51% of the foundry business.
The government has agreed to remove the profit-sharing and claw-back requirements from Intel’s previous $2.2 billion CHIPS grant as part of the agreement, providing the chipmaker greater financial flexibility as it moves forward with U.S. investments.
A ”Great Deal”
The agreement was refer to as “a great deal” by President Trump, who imply that it is reach following a heated White House meeting earlier this month. Because of the CEO’s previous connections to Chinese companies, he had at the time openly called for Tan’s resignation.
“He came in wanting to keep his job, and he ended up giving us $10 billion for the United States,” Trump stated at the conclusion of their discussions. Thus, we received $10 billion.
According to Intel CEO Lip-Bu Tan, who welcome the news, the company is dedicate to creating and producing the most cutting-edge chips in the world in the United States.
Tan about the Presidential Administration
“Historic investments in a crucial sector that is essential to the nation’s economic. And national security is being drive by President Trump’s focus on American chip manufacturing. “We appreciate the trust that the President. And the Administration have shown in Intel. And we look forward to working to further U.S. manufacturing leadership and technology,” Tan continued.
The deal comes at a special time for Intel. It was once a leader in computer chips. But it is now having trouble keeping up with competitors such as AMD and NVIDIA. Missing out on the smartphone revolution, and lagging in the fast-growing AI industry. It recently cut thousands of jobs and lost nearly $19 billion last year. Reflecting the severity of its problems, Intel’s market value has fallen more than 50% since 2021 to $111 billion.
After the deal confirm, Intel’s stock fell 1% in after-hours trading after rising 5.5% in regular trading on Friday.
The big move was that of the government – it would provide a short-term liquidity boost for Intel, but in the long term it could have a huge political impact.