The Biden administration announced nearly $20 billion in new grants and loans to bolster Intel's chip-making facilities in the US, representing the largest funding announcement from the White House to date. This move is aimed at addressing China's dominant position in the critical technology sector.

President Joe Biden chose to announce the decision during a trip to Arizona, emphasising his strategy of showcasing legislative accomplishments in pivotal battleground states before the upcoming presidential rematch against Donald Trump in November. Arizona, one of the closest races in the 2020 elections, saw Biden secure victory by a margin of just 10,457 votes.

The White House announced in a statement."The Department of Commerce has reached a preliminary agreement with Intel to provide up to $8.5 billion in direct funding along with $11 billion in loans under the CHIPS and Science Act,"

The funds "will support the construction and expansion of Intel facilities in Arizona, Ohio, New Mexico, and Oregon, creating nearly 30,000 jobs and supporting tens of thousands of indirect jobs."

Winning in 2024 could prove crucial for President Biden, who faces a tough reelection fight as he seeks to convince voters still skeptical about his economic record, despite strong recent growth and job creation data, persistently low unemployment, and slowing inflation.

US Commerce Secretary Gina Raimondo informed reporters that the $8.5 billion direct funding announcement is the largest grant made so far under the $52.7 billion 2022 CHIPS and Science Act, ahead of the announcement.

She stated that the funds would encourage Intel to make investments worth over $100 billion, which would constitute one of the largest investments ever in US semiconductor manufacturing. She added that this initiative would align the US towards achieving its goal of producing 20 percent of the world’s cutting-edge chips by 2030, a significant increase from the current zero percent.

She stated, "We depend on a limited number of factories in Asia for our most advanced chips. This situation is unsustainable and unacceptable." She added, "It poses both economic and national security challenges, and we are committed to addressing it."

According to the White House, Intel intends to take advantage of the US Treasury Department's Investment Tax Credit, which can reach up to 25 percent on specific capital expenses. This move is expected to substantially augment the financial assistance provided by the US government to Intel. The tax credit is associated with another policy implemented by the Biden administration in 2022, known as the Inflation Reduction Act.

Biden's National Economic Advisor, Lael Brainard, hailed Intel's investment as a significant milestone in America's economic revival. The $100 billion commitment aligns with President Biden's pledge to rejuvenate the semiconductor industry in the United States.

The initiative is expected to generate 10,000 new manufacturing positions and 20,000 construction jobs, with a substantial portion being unionized. In Arizona and Ohio alone, the investment will create 10,000 direct jobs, including 3,000 manufacturing roles and 7,000 construction positions.

Image source: Bloomberg