The deal is the largest intervention in private business since the auto bailout of 2008.
The U.S. government will buy a 10% stake in Intel, the struggling chip-maker with a major presence in Oregon.
Under the terms of the deal, announced Friday, the federal government will become Intel’s largest shareholder, though the government will not take a board seat or hold governance rights at Intel, The New York Times reported.
Under the deal, nearly $9 billion in grants awarded to the company by the 2022 CHIPS Act will be converted to equity. Trump had previously derided the CHIPS Act for giving away money and getting nothing in return.
“We are grateful for the confidence the president and the administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership,” Intel CEO Lip-Bu Tan said in a statement released by Intel.
The move will “both grow our economy and help secure America’s technological edge,” Commerce Secretary Howard Lutnick said Friday. It’s the largest government intervention in a U.S. company since automakers were bailed out in the 2008 recession.
The deal may yet face pushback from shareholders as well as legal challenges. Experts tell the Times the Chips Act may not allow grants to be converted to equity.
The seismic turn of events started on Aug. 7 with a segment on Fox Business News, according to reporting by The Wall Street Journal. Trump reportedly watched a segment airing criticisms of Tan for alleged investments in Chinese companies. Trump took to social media to call for Tan to be fired, which prompted Tan to fly to Washington D.C. to meet with the president. It was then the president floated a federal takeover of the struggling chipmaker, Trump said Friday in the White House.
“I said, ‘I think it would be good having the United States as your partner.’ He agreed, and they’ve agreed to do it,” Mr. Trump said. “And I think it’s a great deal for them.”
The deal came together Wednesday between Lutnick and Intel’s chief finance officer and Intel’s board blessed the deal later that day.
Such a major federal intervention in a private business has drawn criticism from some on the right, who accused Trump of nationalizing private industry, while also drawing praise from some on the left, WSJ reported. Sen. Bernie Sanders called the deal similar to legislation he’d proposed in the past, saying citizens should get compensated when they bail out a failing corporation.
This week, Intel was valued at $108 billion while rival Nvidia, which has been at the forefront of AI development, was valued at $4.3 trillion.
Intel began in 1968 when Robert Noyce, inventor of the microchip and Gordon Moore, left Fairchild Semiconductor and formed a new venture with Andy Grove. They first produced microchips that held small amounts of data but eventually the company developed the first microprocessors, which can perform calculations.
By the mid-1980s, IBM and later Microsoft built their software to run on Intel processors, and by the mid-1990s, Intel was one of the most valuable companies in the world, a ubiquitous supplier of the chips used in most of the world’s computers. Intel’s success helped launch Silicon Valley as a global technology hub. It would remain wildly profitable through 2009, when the Obama administration sued Intel for alleged monopolistic practices.
But Intel is regarded as being late to the party with both the smartphone and artificial intelligence booms. A former CEO turned down the opportunity to supply chips for the first iPhone because the price was too low.
A former board member is quoted by the Times saying that the company gave into complacency and incrementalism and was outpaced by the same disruptive Silicon Valley that Intel harnessed in its rise to the top. Rivals like Taiwan Semiconductor Manufacturing Company and Samsung Electronics were quicker to adapt as Intel perfected its new production processes, the Times reported.
In 2021, a bold plan by former CEO Pat Gelsinger to reinvest in U.S. semiconductor manufacturing received $7.86 billion in grants from the Chips Act. Late last year, Gelsinger abruptly resigned from his role as CEO. Tan was hired in March.
Since then, Tan has scaled back Intel’s expansion plans, developed a new AI approach and aimed to lay off a combined 15% of the company’s global workforce.
The layoffs have been felt in Oregon, which has been home to more than 22,000 Intel employees on four Portland-area campuses, and which recently saw unemployment hit 5% for the first time since the pandemic hit.
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