Washington Curtails Intels Chip Grant After Company Stumbles

The Biden administration plans to reduce Intel’s preliminary $8.5 billion federal CHIPS grant, a move that follows the California-based company’s investment delays and broader business struggles.Intel, the biggest recipient of money under the CHIPS Act, will see its funding drop to less than $8 billion from the $8.5 billion that was announced earlier this year, four people familiar with the grant said.They all spoke on the condition of anonymity because the final contract had not yet been signed.

The change in terms takes into account a $3 billion contract that Intel has been offered to produce chips for the U.S.military, these people said.The government’s decision to reduce the size of the grant follows Intel’s move to delay some of its planned investments in chip facilities in Ohio.

The company now plans to finish that project by the end of the decade instead of 2025.The chip maker has been under pressure to reduce costs after posting its biggest quarterly loss in the company’s 56-year history.The move by the Biden administration also takes into account Intel’s technology road map and customer demand.

Intel has been working to improve its technological capacity to catch up to rivals like Taiwan Semiconductor Manufacturing Company, but it has struggled to convince customers that it can match TSMC’s technology.Intel’s troubles have been a blow to the Biden administration’s plans to rev up domestic chip manufacturing.In March, President Biden traveled to Arizona to announce Intel’s multibillion-dollar award and said the company’s manufacturing investments would transform the semiconductor industry.

Intel’s investment was at the forefront of the administration’s ambition to return chip manufacturing to the United States from Asia.The CHIPS Act, a bipartisan bill passed in 2022, provided $39 billion in funding to subsidize the construction of facilities to help the United States reduce its reliance on foreign production of the tiny, criti...