Intel (INTC) CEO Pat Gelsinger’s extensive lobbying efforts in Washington over the past three years have yielded significant dividends for his company, culminating in the announcement of up to $8.5 billion in grants for American chipmakers in the years ahead. This substantial allocation, hailed by Commerce Secretary Gina Raimondo as the largest grant to any chip recipient, underscores Intel’s pivotal role in President Joe Biden’s initiative to revitalize semiconductor manufacturing in the United States.
The preliminary agreement not only solidifies Intel’s position as a key player in the nation’s semiconductor ecosystem but also serves as a catalyst for attracting private investment. Administration officials anticipate that Intel’s grant will catalyze an additional $100 billion in private capital for semiconductor projects across key states such as Arizona, Ohio, New Mexico, and Oregon.
In addition to the grants, the deal includes government loans of up to $11 billion, further bolstering Intel’s financial backing for its ambitious manufacturing endeavors. Moreover, Intel stands to benefit from a new tax credit on its capital expenses, potentially injecting billions more into its bottom line as it ramps up production capacity for its most advanced chips.
Pat Gelsinger emphasized the significance of this support in positioning Intel and the United States at the forefront of the AI era. He underscored the importance of building a resilient and sustainable semiconductor supply chain to drive innovation and power the nation’s future.
To celebrate this milestone, President Biden and Secretary Raimondo will join Gelsinger on a visit to Intel’s campus in Chandler, Arizona. The expansion of the Arizona facility will entail the construction of two state-of-the-art fabrication plants and the modernization of an existing plant. This investment represents the largest private sector commitment in Arizona’s history and is expected to generate 3,000 permanent manufacturing jobs in the state in the coming years.
How Gelsinger courted Washington
Since assuming the role of CEO at Intel in February 2021, Pat Gelsinger has been deeply engaged in fostering a close relationship with officials in the Biden administration, who were also settling into their new roles at that time. Recognized as a key public advocate for the administration’s semiconductor initiatives, Gelsinger played an instrumental role in advocating for the passage of the CHIPS and Science Act, investing significant time and effort into lobbying efforts in Washington.
Stacy Rasgon of Bernstein Research highlighted Gelsinger’s unwavering commitment to the Washington side of affairs, noting that he dedicated himself wholeheartedly to advancing Intel’s interests in the capital. Despite potentially neglecting other duties amidst his intense lobbying efforts, Gelsinger’s focus on securing crucial funding for Intel’s ambitious goals underscores the significance of the grants and loans received from Washington.
Gelsinger’s proactive engagement with President Biden and other administration officials further solidified Intel’s position as a key player in the semiconductor industry. From virtual meetings to in-person visits, Gelsinger consistently advocated for Intel’s interests and showcased the company’s commitment to expanding its manufacturing capabilities in the United States.
During the 2022 State of the Union address, President Biden used Intel as a compelling example to emphasize the importance of passing the CHIPS legislation, highlighting the potential growth of Intel’s investments contingent upon the bill’s passage. Gelsinger’s active participation in negotiations, including a notable tweet in July signaling Intel’s stance on delaying major construction until Congress acted, underscored the company’s determination to secure legislative support.
With the successful passage of the bill later that summer, Gelsinger’s persistent advocacy efforts bore fruit, culminating in a landmark achievement for Intel and the semiconductor industry as a whole. President Biden’s presence at the formal groundbreaking of Intel’s facility in Ohio further underscored the significance of Gelsinger’s advocacy and the administration’s commitment to revitalizing American semiconductor manufacturing.
As construction gears loomed in the background, President Biden’s acknowledgment of Gelsinger’s efforts with a simple “Pat, thank you” served as a poignant recognition of the CEO’s instrumental role in driving Intel’s strategic objectives and advancing the nation’s semiconductor agenda.
The outsized role of Arizona
Wednesday’s announcement not only solidifies Intel’s pivotal role but also emphasizes Arizona’s prominence in President Biden’s strategy to revitalize semiconductor manufacturing in the United States. Alongside Intel’s significant investment, the Taiwan Semiconductor Manufacturing Company (TSMC) is making strides with its flagship fabrication plant in northern Phoenix, poised to receive its own government grant in the near future.
While the focus remains on Intel’s groundbreaking news, discussions with other major players like TSMC are ongoing, underscoring Arizona’s emergence as a hub for semiconductor innovation. However, Arizona’s workforce challenges loom large, with concerns about recruiting and retaining American workers to support the burgeoning semiconductor industry. TSMC’s recent announcement of a delay in the full-scale launch of its Arizona plant to 2025, citing worker shortages, underscores the critical need for workforce development initiatives.
To address these challenges, the government’s agreement with Intel includes comprehensive provisions for training and workforce development, including $50 million in additional funding from the CHIPS law. Enacted just 19 months ago, the law allocates substantial resources to bolster American manufacturing, with a focus on semiconductor production. Additionally, the law introduces an “advanced manufacturing investment credit” to incentivize companies to expand semiconductor manufacturing capacity in the United States, ensuring long-term benefits for the industry.
Several smaller manufacturing awards, including those for BAE Systems, Microchip Technology, and GlobalFoundries, have already been announced, highlighting the government’s commitment to fostering domestic semiconductor production. Commerce Secretary Gina Raimondo, who leads the implementation of the legislation, has set an ambitious goal of having the US produce 20% of the world’s most advanced semiconductor chips by the end of the decade.
Raimondo believes that Intel’s announcement will propel the nation toward achieving this goal, signaling a significant step forward in reclaiming America’s leadership in semiconductor manufacturing. While the US once dominated global chip production, accounting for nearly 40% in 1990, the current share has dwindled to less than 10%, with advanced semiconductors predominantly manufactured overseas, particularly in Taiwan. Thus, Intel’s investment and Biden’s semiconductor strategy aim to reverse this trend, ensuring America’s competitiveness in the crucial semiconductor industry.