As an analyst, I find myself in a position where I’m reporting on the latest developments between Intel and the US government. While the specifics of their landmark deal are still being ironed out, it’s worth noting that a substantial amount of money has already been exchanged: $5.7 billion, to be precise. This information was disclosed by Intel Finance Chief David Zinsner, who confirmed that this significant sum had recently been transferred from the US government to Intel.
In the past seven days, Intel and the United States government finalized a deal where the government is set to infuse approximately $8.9 billion into Intel. Consequently, the government will acquire a 9.9% ownership share in Intel as part of this agreement.
According to White House Press Secretary Karoline Leavitt, the specifics of the agreement are yet to be finalized. She mentioned on Thursday that the Department of Commerce is still working out the details, and they are in the process of dotting the ‘i’s and crossing the ‘t’s, implying that the discussions are ongoing and not yet concluded.
In such substantial transactions, it’s common for both parties to declare a preliminary understanding first, and afterward, finalize the specifics in a written contract.
A key aspect of the agreement involves a five-year option granting the government the ability to acquire an extra 5% stake in Intel at a price of $20 per share, should Intel choose to relinquish control over its semiconductor manufacturing division. However, as per Zinsner’s assessment, this situation seems improbable.
It’s unlikely we will reduce our share below 50%, so I anticipate the warrant will expire naturally. From the government’s standpoint, they seemed to agree: they didn’t want us to transfer control of the business and either spin it off or sell it to someone else.
Last week at a Deutsche Bank conference, Zinsner’s remarks were covered by the Financial Times.
Intel Foundry failings
In essence, the agreement between Intel and the U.S. government allows Intel to maintain ownership over its semiconductor manufacturing operations. Intel Foundry Services is a key component of Intel’s IDM 2.0 (Innovative and Multi-functional) vision, which Intel embarked on in 2021. However, this initiative aimed at producing chips for other companies hasn’t yet yielded profits as intended.
Last year, Intel’s manufacturing service division reported a significant loss of approximately $13 billion. Notably, former Intel CEO Pat Gelsinger, a key figure behind Intel’s initiative to outsource chip production, unexpectedly parted ways with the company during the same period.
Gelsinger aimed to position Intel in a competitive league alongside industry leaders such as TSMC and Samsung through Intel Foundry Services. However, this venture was not forecasted to become profitable until 2027. Post his departure, Gelsinger expressed optimism that with additional time, Intel would have corrected its course.
“The decision to step down from Intel was an extremely difficult one,” said Gelsinger.
Although I intended to complete my task, unfortunately, I didn’t get the chance to do so.
Following his appointment, Intel’s current CEO, Lip-Bu Tan, recently spoke about regaining Intel’s position as a market leader in the semiconductor industry.
In a united effort, we are committed to exerting considerable energy in reclaiming Intel’s status as an outstanding global product provider. Moreover, our goal is to elevate ourselves into a leading foundry at the global level, and provide exceptional customer experiences that surpass all previous benchmarks. This was expressed by Tan.
As a result of difficulties faced by its foundry division, Intel previously announced intentions to separate Intel Foundry Services into an independent entity. However, this decision was made under different management. After the company appointed a new CEO and the government acquired a 9.9% share in the semiconductor manufacturer, it’s clear that the initial plans have been revised.
Obtaining a significant share in Intel forms part of the government’s efforts to promote homegrown chip production. The terms of the agreement seem to indicate that the government favors Intel retaining the lead role in managing Intel Foundry Services.
Intel might continue pursuing strategic investments for its foundry services, while maintaining a significant controlling stake, as long as their ownership doesn’t dip below 51%, as stipulated by the provision in the agreement with the government.
Despite significant funding by the U.S. government, Intel is still experiencing instability. By July of this year, the semiconductor giant had announced that it intends to let go of approximately 24,000 employees by 2025, bringing its workforce down to 75,000. Furthermore, the company has plans to scale back from several projects and decrease overall spending.
To fully understand whether plans might shift, we need to first examine the complete, approved details of the agreement that Intel and the government have reached.
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2025-09-02 01:09