UPDATE 3-Biden awards $19.5 billion in grants and loans to Intel to boost US chip output
(Adds Biden comments in paragraphs 3-6)
By Jeff Mason and Alexandra Alper
CHANDLER, Arizona March 20 (Reuters) - President Joe Biden awarded Intel nearly $20 billion in grants and loans on Wednesday, marking the U.S. government's largest outlay to subsidize leading-edge chip production and supercharging the company's domestic semiconductor chip output.
Biden announced the preliminary agreement for $8.5 billion in grants and up to $11 billion in loans for Intel in Arizona, where some of the funding will be used to build two new factories and modernize an existing one. He said the pandemic helped cause an acute shortage of semiconductors, forcing factories to shut and prices to rise, and he has since been determined to invest in America. "We will enable advanced semiconductor manufacturing to make a comeback here in America after 40 years," the president said. Biden, a Democrat, also attacked Donald Trump and said under the Republican former president's policies, companies sent jobs overseas and Trump's tax cuts helped wealthy corporations.
"If we invented it in America, it should be made in America," Biden said. This investment "will transform the country in a way, you don't even understand."
Commerce Department Secretary Gina Raimondo on Tuesday called it one of the largest investments ever in U.S. semiconductor manufacturing. She said the administration hopes to increase the U.S. share of advanced chip production from 0% to 20% by 2030 through the subsidy program.
The historic outlay shows the Biden administration is betting big on Intel as part of the 2022 CHIPS and Science Act, a bid to boost domestic semiconductor output with $52.7 billion in funding.
It could also help Biden, who lags Trump in voter perceptions of their ability to manage the U.S. economy, to again take Arizona in November's presidential election. The Democrat narrowly won the Southwestern swing state in 2020.
The CHIPS Act's goal is to reduce reliance on China and Taiwan, as the share of global semiconductor manufacturing capacity in the U.S. has fallen from 37% in 1990 to 12% in 2020, according to the Semiconductor Industry Association.
Lawmakers have warned U.S. dependence on chips manufactured in Taiwan by the world's top contract chip manufacturer TSMC is risky because China claims the island as its territory and has reserved the right to use force to retake it.
Republican U.S. Representative Michael McCaul, a sponsor of legislation that helped shape the CHIPS Act, welcomed Wednesday's announcement.
POINT OF PRIDE
Biden's Arizona trip could also help Democrats defend a critical U.S. Senate seat in November and possibly provide a boost in a pair of competitive House of Representatives races.
Arizona was a point of pride for Biden's 2020 campaign, which flipped the state for the first time in six presidential elections, but his aides see delivering a repeat victory as a tall order.
Recent polls show Biden trailing Trump by single digits in the state, according to the website FiveThirtyEight.
BOON FOR INTEL
It is also welcome news for Intel, which in January forecast first-quarter revenue could miss market estimates by more than $2 billion, as it grapples with uncertain demand for its chips used in the traditional server and personal computer markets.
Intel shares ended the day up just 0.36% at $42.20.
In addition to Intel's Arizona projects, the money will help fund company projects in Ohio, New Mexico and Oregon.
The chip maker is also expected to receive as much as $3.5 billion from the Commerce Department to boost security at its Arizona facilities to produce sensitive chips for the military.
The Intel award is the latest in a string of subsidy announcements.
Awards for South Korea's Samsung and Taiwan's TSMC are expected in the coming weeks.
The Commerce Department is dedicating $28 billion for government subsidies for advanced chips manufacturing - although it has more than $70 billion in requests - and also has $75 billion in lending authority. (Reporting by Jeff Mason in Arizona, Alexandra Alper, and David Shepardson in Washington; Additional reporting by Nandita Bose, Trevor Hunnicutt, Richard Cowan and Susan Heavey; Editing by Chris Sanders, Leslie Adler and Jonathan Oatis)
