As the US races to reclaim its semiconductor supremacy, Intel has secured $7.86 billion under the CHIPS Act. But can this historic investment revive a company plagued by losses and stiff competition?
Below, we’ll examine Intel's challenges and how this funding could reshape the future of American chipmaking.
Founded in 1968 and headquartered in Santa Clara, California, Intel Corporation has long been a cornerstone of the global semiconductor industry. They are also a household name, having enjoyed a dominant share of the global CPU market for decades. At its height, it shipped 82.5% of all CPUs.
Known for pioneering microprocessors, Intel shaped the tech landscape with innovations powering personal computers, servers, and IoT devices. The company, which once boasted a market valuation of over $500 billion, now employs around 110,000 workers globally and generates approximately $63 billion annually.
However, its dominance in PCs and servers—holding a substantial but declining market share—faces increasing threats. Not to mention that its 4/5ths of the global CPU market share has shrunk to under 2/3rds over the last decade or so.
The pressure doesn’t seem to be easing, with Intel facing a tumultuous year in 2024. This goes against what most expect of the world’s leading chip company during the AI boom.
Intel reported a staggering $16.6 billion loss for Q3 2024, a record in the company’s 56-year history. Revenue fell by 8%, down to $13.02 billion. This is largely attributed to declining PC and data center sales, which have started to chip away at Intel’s once-unshakable market position.
According to Rosenblatt Securities analyst Hans Mosesmann, this has led Intel’s investors to ask, “Can it be fixed? And who is going to fix it?”
Intel’s struggles are compounded by fierce competition. Taiwan Semiconductor Manufacturing Company (TSMC) has emerged as one of its prime disruptors, manufacturing advanced chips for industry leaders like Apple and NVIDIA.
Adding insult to injury, TSMC is also earmarked for $6.6 billion in CHIPS Act funding, complementing its ongoing expansion in Arizona, where production is set to begin in 2025.
Meanwhile, AMD has steadily eroded Intel’s market share in servers and PCs. Its AI-driven chips and robust data center solutions led to an 18% increase in PC chip revenue in Q3, compared to Intel’s 6% decline. Under the leadership of CEO Lisa Su, Intel’s long-standing competitor is poised to become a formidable alternative in high-performance computing.
Intel’s predicament reflects both unique internal challenges and larger industry trends. While global competition intensifies, U.S. semiconductor firms grapple with the need to innovate rapidly.
However, the gravity of what’s happening at Intel indicates both isolated challenges as well as symptoms of the broader pressures acting on the industry.
In response, Intel CEO Pat Gelsinger took the reins in 2021 and initiated sweeping cost-cutting measures, including layoffs affecting 15,000 employees and suspending dividends. Moreover, Intel has pushed back investment timelines for major projects, such as its semiconductor facilities in Ohio, which are now set to be completed by the end of the decade instead of next year.
In addition to addressing immediate concerns, the company is still making some moves with an eye toward the future.
Many also see Intel’s ambitious 18A manufacturing technology, slated for launch in 2025, as critical for the company’s comeback. It also secured a high-profile chipmaking deal with Amazon.
However, skepticism remains about whether Intel can execute its roadmap, with some investors beginning to call for Intel to cut its manufacturing losses and focus solely on chip design.
As Daniel Morgan of Synovus Trust noted, “A lot of people out there would applaud, let’s say, [Intel] selling off their foundry business.”
The CHIPS and Science Act, championed by the Biden administration and signed into law in 2022, represents a $280 billion effort to reinvigorate U.S. semiconductor manufacturing. Of this, $52 billion is dedicated to bolstering domestic chip production and R&D, aiming to secure supply chains, reduce reliance on foreign manufacturing, and safeguard national security.
President Biden championed the bill’s potential, declaring, “We’re going to become the manufacturing capital of the world again.”
The Act’s implementation prioritizes funding for companies that commit to long-term investments in the U.S. Intel is among the largest recipients, receiving $7.86 billion to expand its manufacturing footprint across Arizona, New Mexico, Ohio, and Oregon.
These projects are expected to create thousands of jobs and establish advanced packaging technologies critical for national defense and technological leadership.
Commerce Secretary Gina Raimondo highlighted the Act's strategic importance, stating, “The CHIPS for America program will supercharge American technology and innovation and make our country more secure—and Intel is expected to play an important role in revitalizing the U.S. semiconductor industry.”
With just over $19 billion of the $39 billion CHIPS Act funding allocated so far, six companies, including TSMC and Micron, have joined Intel in the race to restore U.S. dominance.
While this influx of government cash is undoubtedly a boon to the US under-pressure chipmakers, its future is not 100% certain.
House Speaker Mike Johnson and other Republicans have shown lukewarm support, even suggesting that Republicans will likely try to repeal it. And, with Republicans winning a majority in both Houses of Congress, that’s no empty threat.
Meanwhile, former and incumbent President-Elect Donald Trump has openly criticized the funding strategy, suggesting tariffs as an alternative.
For US-based chip companies, the CHIPS Act is hoped to represent a pivotal moment when giants like Intel will regain their footing and worldwide semiconductor leadership.
As the Act catalyzes domestic production, its ripple effects could reshape global supply chains, intensify rivalries with Asian giants like TSMC, and redefine the industry's power dynamics.
However, Intel’s success hinges on executing its ambitious plans amid fierce competition and internal challenges. The stakes are high for Intel, but so are the potential rewards.