Pentagon scraps plan to spend US$2.5 billion on Intel chip grant
- The shortfall is disrupting plans to distribute money from the Chips Act, a landmark piece of legislation meant to revitalise the US semiconductor industry
- The move means the US Commerce Department may have to make up for the difference, and could affect the amount Intel gets in federal funding
The Pentagon pulled out of a plan to spend as much as US$2.5 billion on a chip grant to Intel, people familiar with the situation said, putting the onus on another federal agency – the US Commerce Department – to make up for the shortfall.
The move threatens to limit the total amount that Intel has been expecting to get in federal funding, setting up a contentious situation, said the people, who asked not to be identified because the deliberations are private. Beyond the defence money, Intel has been seeking incentives worth more than US$10 billion from the Chips and Science Act.
The defence funding was part of a spending package that US President Joe Biden signed into law over the weekend, and it allocates US$3.5 billion for Intel to produce advanced defence and intelligence-related semiconductors.
Commerce, which disburses Chips Act grants, had previously only been responsible for US$1 billion of the cost. But the Pentagon, which initially promised to cover the rest, scrapped that plan in the days leading up to a government funding deadline, said the people. Lawmakers then directed Commerce to use other Chips Act funds to make up the balance.
The shortfall is disrupting plans to distribute money from the Chips Act, a landmark piece of legislation meant to revitalise the domestic semiconductor industry. The change could mean a greater share of Intel’s Chips Act funds is devoted to military uses, rather than commercial ones.