Intel Faces Major Setbacks Despite U.S. Government Support: CHIPS Act Funding, Layoffs, and the Future of Semiconductor Manufacturing in America

Intel Faces Major Setbacks Despite U.S. Government Support: CHIPS Act Funding, Layoffs, and the Future of Semiconductor Manufacturing in America
Image credit: Intel

The U.S. CHIPS and Science Act, passed on August 9, 2022, was designed to revitalize domestic semiconductor manufacturing, with Intel as a primary beneficiary. The law allocated $8.5 billion in direct funding and $11 billion in loans to Intel, alongside a 25 percent tax credit on investments in semiconductor manufacturing facilities that become operational between 2023 and 2026. However, despite these substantial financial incentives, Intel’s stock has plunged by 50 percent since the announcement. The high costs associated with building leading-edge semiconductor fabs, especially in the U.S., are a significant concern, and experts doubt that the CHIPS Act alone will be sufficient to boost Intel’s profitability.

Intel’s 18A Process: The Future of U.S. Semiconductor Manufacturing

Despite the grim financial outlook, there is optimism about Intel’s technological advancements, particularly in its foundry business. Intel is banking on its next-generation production process, Intel 18A, which is expected to compete directly with TSMC’s upcoming 2N process. 

The Intel 18A process will integrate several innovative technologies, including 3D hybrid bonding, nanosheet transistors, and back-side power delivery. If successful, Intel 18A could restore Intel’s position at the forefront of semiconductor manufacturing. However, the company still faces the challenge of attracting customers to its foundry business while maintaining its own chip design operations, a balancing act that is critical to its future success.

Intel’s Struggles Highlight the Need for Additional U.S. Government Support

Intel’s poor second-quarter financial results and the subsequent announcement of layoffs affecting 15 percent of its workforce have raised concerns about the future of U.S. semiconductor manufacturing. Rob Atkinson, president of the Information Technology and Innovation Foundation, warns that more government intervention may be necessary if Intel is to remain competitive. Atkinson suggests that additional funding, support, or incentives may be required, as the current provisions of the CHIPS Act might not be enough to secure leading-edge semiconductor fabs owned by U.S. corporations. 

His think tank recently recommended extending the 25 percent tax credit for semiconductor investments through at least 2030 to ensure continued support for the industry.

The High Cost of Leading-Edge Semiconductor Manufacturing

Building semiconductor fabs, especially those on the leading edge, is notoriously expensive. A December 2023 report from International Business Strategies estimated that TSMC’s global investment in its upcoming N2 (2-nanometer) process could reach $28 billion, while the cost of Samsung’s new fabs in Texas could be as high as $44 billion. 

Although companies like Samsung and TSMC are leveraging incentives to build fabs in the U.S., Intel remains the only U.S.-based company with leading-edge semiconductor fabs. As a result, Intel’s struggle to maintain profitability and stay competitive raises concerns about the future of domestic chip manufacturing, even with the significant financial backing provided by the CHIPS Act.

### The Future of Intel and U.S. Domestic Chip Manufacturing

Intel’s future, and by extension the future of U.S. domestic chip manufacturing, remains uncertain. While Intel’s technological innovations, such as FinFET and Foveros, demonstrate the company’s potential to lead in semiconductor manufacturing, its financial woes and competitive challenges cannot be ignored. Intel’s CEO Pat Gelsinger has attempted to address these issues by reorganizing the company into Intel Foundry Services and Intel Product, but it remains to be seen if this restructuring will alleviate customer concerns and stabilize the company’s position in the market. As Intel 18A enters production in 2025, the company’s ability to deliver on its promises will be critical in determining the success of both Intel and the broader U.S. effort to bolster domestic semiconductor manufacturing.