Earlier today, President Trump opined publicly on the US government's equity stake agreement with Intel, terming it a "great deal" that was now likely to be replicated with other semiconductor players. Intel's CEO Lip-Bu Tan and Trump are poised to unfurl the nitty-gritty surrounding this equity deal at a dedicated event in the White House later today.
As we've been noting ad nauseum over the past few days, the Trump administration has been looking to acquire a 10 percent stake in Intel. To do so, the administration is planning to convert into equity the $7.9 billion in grants earmarked for the struggling semiconductor company under the CHIPS Act fund as an inducement to re-shore chip fabrication in the US, as well as the $3 billion grant that Intel received under the Pentagon's Secure Enclave program.
What's more, as per the recent comments by the US Commerce Secretary Howard Lutnick, the administration might acquire similar equity stakes in other relatively smaller semiconductor players, barring the industry giants such as TSMC and Micron, especially after the former reportedly threatened to abandon its CHIPS Act award of $6.6 billion if the Trump administration were to pursue the award's conversion into an equity stake.
Here Are All Of The Details On The Trump Administration's Deal With Intel That We Know So Far
As far as specifics are concerned, the US government is now poised to acquire a 9.9 percent stake in Intel, bereft of a board seat or any major governance role, as per the reporting by the Wall Street Journal. Additional details are as follows:
- The US government's equity stake will be funded by $5.7 billion in CHIPS Act grants that are yet to be transferred to Intel, plus the $3.2 billion Secure Enclave award from Pentagon.
- After taking into account the $2.2 billion in CHIPS Act grants that Intel has already received, the total government funding for the chipmaker is now equal to $11.1 billion.
- The government is purchasing 433.3 million Intel shares at a price of $20.47 per share, which is equivalent to a 9.9 percent stake in the company.
- The government’s investment in Intel will be of a passive nature, with no Board representation or other governance or information rights.
- The US government will vote with the Intel’s Board of Directors on matters requiring shareholder approval, with limited exceptions.
- The US government will receive a five-year warrant, at $20 per share for an additional five percent of Intel common shares, exercisable only if Intel ceases to own at least 51% of the foundry business.
The last point highlights Trump administration's compulsion to create a contingency if Intel does end up spinning over 49 percent of its foundry business.
Of course, the Bank of America (BofA) recently identified the deal's primary advantage for Intel, one that bolsters the chipmaker's "U.S.-based manufacturing" especially as new and existing fabless customers are likely to compete with each other to "expand their made-in-the-U.S. presence."
In fact, SoftBank appears to have reached the same conclusion as it recently pledged to invest $2 billion in Intel to gain exposure to "semiconductor innovation in the United States."
However, BofA believes this opportunity for Intel also comes with a few hefty drawbacks, including a “10% dilution of existing common shareholders without any additional near-term benefits,” renewed pressure to deliver on critical projects such as Intel's much-delayed Ohio fab, and “likely higher scrutiny of/pushback from customers in China that accounted for ~29% of INTC total sales in FY24.”
We will continue to update this post with pertinent details as they trickle in.
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