Trump Administration’s Intel Deal Forces Company to Keep Losing Money Foundry Unit
The Trump administration appears to be exerting influence over Intel’s autonomy regarding strategic decisions for its ailing foundry business division.
At a Deutsche Bank conference on Thursday, Intel Chief Financial Officer David Zinsner disclosed fresh insights about the company’s recent agreement with the U.S. government, which granted a 10% equity stake to the federal government.
The arrangement is designed to impose penalties on Intel if it spins off or sells its foundry business unit, which specializes in creating custom chips for external clients, within the ensuing years.
Last week’s deal incorporated a five-year warrant that enables the U.S. government to acquire an additional 5% of Intel, at $20 per share, should the company retain less than 51% equity in its foundry business. Zinsner anticipates that this warrant will expire.
“I believe the government was aligned with this; they didn’t want to see us transfer the business or sell it to someone else,” he stated.
Zinsner further revealed that Intel received $5.7 billion in cash on Wednesday, as a result of last week’s deal, according to Reuters. This cash is derived from outstanding grants previously awarded but not yet disbursed to Intel under the U.S. CHIPS and Science Act.
White House press secretary Karoline Leavitt informed reporters today that the terms of the agreement are still being finalized.
Intel declined to comment on the deal beyond Zinsner’s statements.
This contract structure undeniably reflects the Trump administration’s ambition to boost chip manufacturing within the United States, as numerous industry players opt for Taiwan Semiconductor Manufacturing Company’s offshore production.
However, this warrant compels Intel to maintain a business unit that is reporting significant losses. Intel Foundry posted an operating income loss of $3.1 billion during the second quarter and has been a contentious issue within the semiconductor industry.
There have been demands from analysts, board members, and investors alike for the troubled foundry unit to be spun off, which seemed imminent last fall, prior to the unexpected retirement of Intel Foundry’s architect, former CEO Pat Gelsinger, in December.
