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.
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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.