Intel’s significant investment in chip-manufacturing capacity may receive a major boost as the company emerges as the frontrunner for a multibillion-dollar funding package from the government. The funding aims to establish secure microchip manufacturing facilities for military applications, reducing the United States’ reliance on imported chips from Asia, especially Taiwan.
According to reports from The Wall Street Journal, Intel (ticker: INTC) is the leading candidate for this funding. However, the company has not provided an immediate response to requests for comments regarding the report. Intel’s shares saw a 0.6% increase in premarket trading.
If Intel secures this government funding, it will serve as an endorsement of CEO Pat Gelsinger’s strategy to position the company as a domestic alternative to Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract chip maker. Meanwhile, Taiwanese depositary receipts for Taiwan Semi experienced a minor drop of 0.2% in premarket trading.
In 2021, Intel announced plans to invest over $43.5 billion in new manufacturing capacity in Arizona, New Mexico, and Ohio. While this expansion has impacted margins, Intel received positive feedback from analysts regarding its most recent earnings report, suggesting increased client interest in its chip-manufacturing business.
Analyst Angelo Zino from CFRA highlighted that part of Intel’s strategy includes providing a “geopolitical hedge” against concerns over China’s actions towards Taiwan. China views Taiwan as a breakaway province and intends to unify it with the mainland.
In conclusion, Intel’s potential government funding for secure chip manufacturing represents a significant opportunity for the company to enhance its position in the market and reduce dependency on imports. This investment aligns with Intel’s strategic approach as it aims to offer a domestic alternative to Taiwan Semiconductor Manufacturing, while also serving as a geopolitical safeguard.