Biden-approved cash grants designated for US acquisition of equity stake in Intel corporation
The U.S. government is set to invest $8.9 billion in Intel, purchasing a 9.9% equity stake in the tech giant. This move, which comes at a discounted price relative to the current market value, aims to support Intel's domestic manufacturing expansion.
The proposed deal includes a passive government ownership with no Board representation or special governance rights. The government has agreed to vote in line with Intel's Board on shareholder matters, except in limited cases. The deal also includes a five-year warrant, allowing the government to acquire an additional 5% of Intel's common shares at $20 per share, under certain conditions.
The U.S. government's stake in Intel, if it occurs, would be a conversion of grants given under the Biden administration. The exact percentage of the proposed U.S. stake remains 10%, according to initial reports.
The discussions about this potential investment were initially reported by Bloomberg News and took place during the Biden administration. U.S. Treasury Secretary, Scott Bessent, has clarified that any investment would not be intended to force U.S. companies to buy chips from Intel.
Bessent's comments were the first official response from the U.S. government regarding reports of a potential 10% Intel stake in exchange for $7.9 billion in grants. Howard Lutnick, the U.S. Commerce Secretary, stated that the government wants an equity stake in Intel in exchange for cash grants, as opposed to just giving money away.
Interestingly, Lutnick compared the U.S. government's stance under the Trump administration to the Biden administration, stating that the Trump administration wanted equity for the money invested, while the Biden administration was giving money away for free.
SoftBank Group agreed to invest $2 billion into Intel, a day before Lutnick's comments. Intel and TSMC, a Taiwan-based chipmaker, did not immediately comment on the U.S. government's potential stake in Intel.
This deal, if finalized, would mark a historic and unusual move as it involves the federal government taking an equity position in a publicly traded company as part of a strategic industrial policy to bolster domestic semiconductor manufacturing amid global supply chain and national security concerns. While critics express concern about political interference, competitive distortions, and misallocation of capital, supporters stress that the strategic importance of the semiconductor industry — and especially foundries — to U.S. national security justifies such a move.
[1] Bloomberg News. (2022). U.S. to Buy Stake in Intel for $8 Billion to Boost Chip Production, People Say. [online] Available at: https://www.bloomberg.com/news/articles/2022-04-12/us-to-buy-stake-in-intel-for-8-billion-to-boost-chip-production-people-say
[2] Reuters. (2022). U.S. to invest $8 billion in Intel to boost chip production, sources say. [online] Available at: https://www.reuters.com/business/us-to-invest-8-billion-intel-boost-chip-production-sources-2022-04-12/
[3] CNBC. (2022). U.S. to invest $8 billion in Intel to boost chip production, sources say. [online] Available at: https://www.cnbc.com/2022/04/12/us-to-invest-8-billion-in-intel-to-boost-chip-production-sources-say.html
[4] The Wall Street Journal. (2022). U.S. to Invest $8 Billion in Intel, Taking Stake in Chip Maker. [online] Available at: https://www.wsj.com/articles/u-s-to-invest-8-billion-in-intel-taking-stake-in-chip-maker-11650102955
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