Trump Administration Locks Intel Into Foundry Business with Equity Stake

Intel government stake

The Trump administration has taken the unusual step of converting $8.9 billion in Chips Act manufacturing grants into a direct 10 per cent equity stake in Intel, a move designed to keep the chipmaker tied to its loss-making foundry business.Intel’s Chief Financial Officer David Zinsner revealed the structure at a Deutsche Bank conference, saying the arrangement effectively prevents the company from spinning off or selling its contract chipmaking unit. This business lost $13 billion last year and has struggled to compete with Taiwan Semiconductor Manufacturing Company (TSMC).

Warrants as Leverage

The agreement includes a five-year warrant that allows the government to acquire another 5 per cent of Intel at $20 per share if the company’s stake in the foundry business drops below 51 per cent. “I don’t think there’s a high likelihood that we would take our stake below the 50 per cent,” Zinsner said, describing the warrants as “friction” meant to prevent a divestiture.

White House press secretary Karoline Leavitt confirmed the Department of Commerce is still finalizing the deal.

Intel Under Pressure

Analysts, including Citi and some former Intel board members, have long called for Intel to shed its foundry unit. Rival chipmaker Qualcomm has expressed interest in acquiring it, and investor discontent mounted after Intel ousted Chief Executive Pat Gelsinger, the architect of its foundry strategy, in December. His successor, Lip-Bu Tan, is tasked with shoring up the company’s finances while keeping the foundry plan intact.

Funding Certainty and Customer Perception

Intel received $5.7 billion of the investment this week, with another $3.2 billion contingent on meeting Department of Defense milestones. Zinsner said converting the grants to equity “effectively guaranteed that we’d get the cash,” insulating Intel from capital-market volatility.

He also noted the government stake could enhance Intel’s credibility with prospective customers, though major players such as Nvidia, Apple, and Qualcomm have yet to place orders with Intel’s foundry.

Other Deals in Motion

In parallel, Intel has been raising cash through asset sales and external investments. The company sold $1 billion in Mobileye shares and is close to selling 51 per cent of its Altera unit to private equity firm Silver Lake. SoftBank also invested $2 billion in Intel last week.

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