Intel's agreement with Trump contains a provision for a financial penalty if the company decides to sell its fabrication plants.
Intel, the tech giant, is making strides in its foundry business, with significant developments unfolding due to the CHIPS Act.
The government has taken a 10% equity stake in Intel, in exchange for $5.7 billion in outstanding grants under the CHIPS Act. This investment has now found its place on Intel's balance sheet. Notably, the government's equity stake comes with a clause that could potentially increase to an additional 5% if Intel were to lose controlling interest (less than 51%) in its manufacturing business. This clause is intended to deter Intel from selling or spinning off its foundry division.
Intel's foundry division has been a focus of attention, with ex-Intel board directors calling for its spin-off. Despite this, the company is making steady progress. Intel is making incremental improvements on yields with its 18A node, which was intercepted early to make it a foundry node. The company's Panther Lake CPUs using the 18A node are still on track, with the first SKU due out by the end of this year.
Winning a big customer next year is not necessary to secure opportunities for Intel's 14A process node. While the company tracks its pipeline internally, it does not declare anything until a customer signs a commitment. Intel needs external chip customers to make the 14A process node pay off, and it may announce external foundry customers next year.
Interestingly, Intel saw the government's suggestion to convert the grant to an equity holding as an opportunity to get $5.7 billion in cash. However, a significant amount of uncertainty exists as to whether Intel will receive the total CHIPS Act grant amount. The agreement includes conditions that Intel must retain 50.1% ownership and/or voting rights in the foundry division if spun out. If Intel maintains a majority share of the foundry business, the clause will not trigger in the five-year period.
In summary, Intel's foundry business is progressing, despite calls for a spin-off. The company is making steady improvements with its 18A node and is expected to announce external foundry customers next year. The CHIPS Act investment has provided Intel with much-needed cash, but the full grant amount is uncertain, and the government holds a clause to increase its equity stake if Intel loses control of its foundry division.
