Sure, good industrial policy and important for national security to put semiconductor production on US soil. But these massive government handouts to the richest companies?

The government is expected to award Intel $23 billion in subsidies, plus Intel expects to claim another $25 billion in Investment Tax Credits in order to invest $100 billion over five years in chip making capacity, research and development, and advanced packaging projects in the US, according to a slew of announcements today.

But since 2008, Intel has incinerated $94 billion in cash to buy back its own shares to prop up the price of its shares. Intel stopped doing share buybacks in 2021 under the new CEO Pat Gelsinger, as he steered the company back to investing its cash – and now taxpayer cash – into the future of the company in order to not be totally left behind.

If Intel hadn’t wasted $94 billion in cash on share buybacks to enrich its shareholders, it would now have the $94 billion in cash for its $100 billion investment, or it could have invested the $94 billion years ago in US-based research, development, and manufacturing plants, and it wouldn’t be so far behind now.

Today, Intel and the Commerce Department announced  that they signed a non-binding preliminary memorandum of terms (PMT) under the CHIPS and Science Act, for  $8.5 billion in grants that don’t have to be paid back plus up to $11 billion in loans.

In addition, Intel announced today that it expects to claim $25 billion in Investment Tax Credits as it plans to invest $100 billion over the next five years in chip making capacity, research and development, and advanced packaging projects in the US. The ITC was designed from get-go to incentivize companies to invest in the US, but apparently, that alone is not enough after all the share buybacks.

In addition, Intel is expected to receive up to $3.5 billion in separate funding for manufacturing of military and intelligence chips at its Arizona facilities, according to Reuters and Bloomberg.

The funds will be disbursed over time in phases upon reaching benchmarks and production goals. “The PMT provides that the direct funding award and federal loans are subject to due diligence and negotiation of a long-form term sheet and award documents, and are conditional on the achievement of certain milestones and remain subject to availability of funds,” Intel said.

And AI hype has to crown the whole thing: “AI is supercharging the digital revolution and everything digital needs semiconductors. CHIPS Act support will help to ensure that Intel and the U.S. stay at the forefront of the AI era as we build a resilient and sustainable semiconductor supply chain to power our nation’s future,” Intel said.

“The proposed funding would help advance Intel’s critical semiconductor manufacturing and research and development projects at its sites in Arizona, New Mexico, Ohio and Oregon, where the company develops and produces many of the world’s most advanced chips and semiconductor packaging technologies,” Intel said.

Intel’s project in Arizona (Silicon Desert) comprises several large facilities, the first of which should become operational by the end of 2024. Construction on the Ohio project is expected to be completed in 2026.

Intel is the biggest chipmaker to make a deal under the CHIPS Act so far. Smaller subsidy deals have already been announced by the US entity of BAE Systems, Microchip Technology, and GlobalFoundries. Hundreds of companies have lined up to get some handouts.

The CHIPS Act budgeted $39 billion in grants (of which Intel is getting $8.5 billion) plus loans and loan guarantees of $75 billion. The idea is to induce semiconductor makers to produce semiconductors in the US, rather than in Asia, with inducements that come on top of the 25% ITC.

We just relish those government handouts on a massive scale to the richest companies – sure, we get it, it’s good industrial policy and important for national security to put research, development, and manufacturing of the all-important semiconductors back onto US soil. But how about hitting foreign and US companies that import semiconductors and other products to the US with huge tariffs to pay for the subsidies? But no. So folks, hang on to your wallets. Just kidding. We’re going to borrow it. We’re going to throw it on top of the $34.5 trillion we already owe and no one is even going to notice it.


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