The White House confirmed on Tuesday that the Trump administration is working on a deal that could see the US government taking a 10% stake in chip giant Intel.
“The president wants to put America’s needs first, both from a national security and economic perspective,” White House press secretary Karoline Leavitt told reporters.
The potential agreement could involve swapping existing government grants for Intel shares, according to US Commerce Secretary Howard Lutnick.
The highly unusual move could help Intel as it struggles to compete with rivals like Nvidia, Samsung and TSMC, particularly in the booming artificial intelligence (AI) chip market. Intel has been contacted by the BBC for comment.
The US wants a stake Intel in exchange for grants approved during the Biden administration, Lutnick said on CNBC on Tuesday.
“We should get an equity stake for our money,” he added. “We’ll get equity in return for that… instead of just giving grants away.”
The potential deal, which was first reported last week, aims to help Intel build a flagship manufacturing hub in the US state of Ohio. At the time, a White House spokesman told the BBC that the reports “should be regarded as speculation” unless officially announced.
Last week, Intel did not comment directly about reports but said it was “deeply committed to supporting President Trump’s efforts” to strengthen manufacturing and technology in the US.
On Monday, Japanese investment giant Softbank said it would buy a $2bn (£1.5bn) stake in Intel, in a move that some analysts said is a sign of confidence in the firm’s turnaround.
After that announcement, the firm’s shares rose by almost 7% in New York on Tuesday.
Intel is one of the few American companies capable of producing high-end semiconductors at scale but the company has fallen behind global rivals.
The government taking a stake in Intel makes sense, given the company’s key role in producing semiconductors in the US, said Vincent Fernando from investment consultancy Zero One.
Washington needs critical industries like chip manufacturing and defence to not have to rely on foreign suppliers, he said.
The potential conversion of grants into shares could give Intel a lift but may add “uncertainty for any company who is already part of a federal grant programme or considering one”.
While the US government took stakes in companies during the global financial crisis this move is “extremely unusual” said Kevin J Fox from the University of New South Wales Sydney.
But Professor Fox highlighted that Intel is not at risk of imminent collapse and said partial state ownership could make it more difficult to run the business effectively.
It could also deter other companies from accepting government grants, he added.
The developments came as the US chip industry is under intense scrutiny by the White House.
Last week, Nvidia and AMD agreed to pay the US government 15% of their Chinese revenues as part of an unprecedented deal to secure export licences to China.
Source: BBC
