U.S. authority holds a 10% stake in Intel corporation.

Intel Seeks to Expand as a Semiconductor Manufacturer for Others, Bolstered by U.S. Government Investment

In a significant move, Intel, the American tech giant, is aiming to establish a second pillar as a contract manufacturer for other semiconductor providers, in addition to its own chips. This ambition comes with a new development: the U.S. government has become a 10% shareholder in Intel, following an investment of $8.9 billion.

The investment, according to an Intel statement, is subsidised for expanding U.S. production, a move that aligns with the U.S. and Europe's long-standing efforts to bring chip production back to the West. However, this investment has not been without controversy, particularly under the presidency of Donald Trump.

Trump, who caused difficulties for Intel through the U.S. government's involvement, has consistently referred to the subsidies for chipmakers to expand U.S. production introduced under his predecessor Joe Biden as wasteful spending. Despite this, the investment in Intel has been made to counter the shift of chip production to Asia, where high-tech chips, including those used in smartphones, are primarily produced, due to decades of high subsidies.

Intel, once a dominant player in the semiconductor market, is facing challenges, particularly in the artificial intelligence chip sector, where Nvidia has taken the lead. The company is also under pressure in its traditional business of PC processors and data center chips.

The U.S. government will hold non-voting shares in Intel, not having direct influence on its management decisions. However, within five years, the U.S. government can buy an additional 5% stake at $20 per share if Intel holds less than 51% of its manufacturing business.

The investment has had a positive impact on Intel's stock, with it rising by around 5.5% to $24.80 in U.S. trading on Friday. Analyst Stacy Rasgon stated that Intel's chances of receiving the promised subsidies have improved with the government's stake, but it doesn't help the company attract new customers.

Notably, plans for a large Intel factory in Magdeburg were abandoned due to lack of demand. The geopolitical tensions between Taiwan and China, a major hub for chip production, add another layer of complexity to Intel's ambitions.

As Intel navigates these challenges, it remains to be seen how the company will fare in its quest to become a significant player in the contract manufacturing of semiconductors.