This funding, announced by the Department of Commerce, will support Intel’s manufacturing projects in Arizona, New Mexico, Ohio, and Oregon, to revitalise the American semiconductor industry under the CHIPS and Science Act of 2022.

The CHIPS Act, a signature initiative of President Joe Biden’s administration, allocates $52.7 billion to strengthen the domestic chipmaking sector. Of this, $39 billion is earmarked for semiconductor production and $11 billion for research and development. 

Intel’s subsidy is the largest awarded to date under the programme, as the government seeks to reduce reliance on foreign supply chains and address vulnerabilities exposed during the pandemic.

Intel, which has already achieved several project milestones, is expected to receive at least $1 billion of the subsidy by the end of 2024. 

Commerce Secretary Gina Raimondo spoke on the impact of this investment, stating that it ensures “American-designed chips are manufactured and packaged by American workers for the first time in years.”

Scaling Domestic Capacity Amid Challenges

Intel’s funding will help in boosting the U.S. semiconductor space. The company has committed to an expansive $100 billion domestic manufacturing initiative across four states, which includes constructing new facilities and upgrading existing ones. 

However, the grant amount was revised from an earlier projection of $8.5 billion, following Intel’s separate $3 billion contract with the Department of Defense for producing advanced semiconductors under a national security programme. 

This adjustment was made without compromising the company’s vision or its projects’ timelines.

Nevertheless, the chipmaker had declining profit margins and workforce reductions have followed years of aggressive investments led by CEO Pat Gelsinger. 

But Gelsinger noted the importance of bipartisan support for restoring U.S. technology leadership, calling it “critical to the nation’s economic growth and security.”

Intel’s evolving business strategy includes transitioning to a “foundry” model, where it produces chips designed by external firms. This change has necessitated significant capacity-building, with major investments in new fabrication plants, particularly in Ohio and Arizona. 

Yet, global market challenges have delayed some projects, including those in Germany and Poland, reflecting the complex dynamics of the semiconductor industry.

Safeguards and Incentives

The Commerce Department has introduced measures to ensure accountability and protect taxpayer funds. Intel’s award includes restrictions on stock buybacks for five years and provisions for sharing excess profits. 

Again, the company opted against an $11 billion government loan initially offered, pointing to unfavourable terms for its shareholders.

Beyond direct subsidies, Intel stands to benefit from a 25% investment tax credit on qualified expenditures exceeding $100 billion. These incentives, coupled with strategic partnerships, such as its agreement with Tower Semiconductor, allow the company to strengthen its domestic and global footprint.

The U.S. government has prioritised semiconductor production as a cornerstone of its industrial and economic strategy. The CHIPS Act is part of a goal to reshore manufacturing, create high-paying jobs, and enhance national security. 

White House Deputy Chief of Staff Natalie Quillian described the Intel subsidy as an essential step in implementing this vision, reiterating its role in delivering tangible benefits to the American people.

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This is due to national security risks, causing the company to retreat from one of the world’s largest markets.

Kaspersky announced that it would begin phasing out its U.S. business starting July 20, making the operations unsustainable under the new legal constraints. The decision will impact fewer than 50 employees based in the United States.

The U.S. Commerce Department introduced the ban in June, labelling it a necessary step to protect national security.

U.S. Commerce Secretary Gina Raimondo pointed out issues of the potential for the Russian government to leverage Kaspersky’s software to access and misuse the personal data of American users.

This ban prohibits Kaspersky from selling its software directly or through U.S.-based resellers and also prevents the company from providing updates or security patches after September 29.

This will lead to a gradual decline in the software’s effectiveness in protecting against cyber threats.

Kaspersky initially planned to challenge the ban, arguing that its operations did not pose a threat to U.S. national security. However, the company has now opted to comply with the order, given the huge impact on its business.

The U.S. government’s ban on Kaspersky is not unprecedented. In 2017, the Trump administration banned the use of Kaspersky software within federal agencies following concerns over its prospective misuse by Russian intelligence.

These historical suspicions, coupled with ongoing geopolitical tensions, have led to the current comprehensive prohibition.

Despite the ban, U.S. consumers using Kaspersky products will not be penalised. However, they are strongly advised to transition to alternative security solutions to ensure their continued protection.

Additionally, the U.S. Treasury has sanctioned several senior executives at Kaspersky, barring U.S. entities from conducting business with them.

This move further isolates the company from the U.S. market, making it increasingly difficult for Kaspersky to operate within the country.

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