Intel's Bold Gambit: Why a Government Equity Stake Was on the Table for CHIPS Act Funding

In a surprising twist amidst the massive rollout of the CHIPS and Science Act funding, Intel CEO Pat Gelsinger made an extraordinary proposal: he suggested the U.S. government take an equity stake in Intel in exchange for a portion of the much-coveted grants. This audacious offer, designed to align government and corporate interests for the long haul, sparked considerable discussion, yet ultimately diverged from the Biden administration's established strategy for revitalizing America's semiconductor industry.

Gelsinger’s rationale was rooted in a vision of shared destiny.

He argued that if the government truly wanted to ensure the longevity and success of domestic chip manufacturing, a direct ownership stake would create a powerful incentive for mutual success. "If the government wants to get a better return for their investment, they should take equity," Gelsinger stated, suggesting it would foster a stronger, more enduring partnership rather than a mere transactional grant.

This unconventional idea briefly flirted with consideration within the Treasury Department, which had initially explored the possibility of taking equity in companies receiving CHIPS Act funds.

The underlying concern was to ensure taxpayer dollars were prudently managed and that the government could potentially share in the upside if these investments flourished. However, the White House ultimately drew a clear line, rejecting the notion of the government becoming a shareholder in private corporations receiving grants.

The Biden administration's stance was unequivocal: the CHIPS Act's primary objective is to rapidly accelerate domestic semiconductor production, reduce America's dangerous reliance on foreign supply chains, and bolster national security.

Introducing complex equity negotiations would undoubtedly slow down the deployment of funds – a critical risk the administration aimed to avoid. As a senior administration official articulated, the goal is "to get these fabs up and running as quickly as possible, not to become a government investment fund." The focus remained on straightforward grants and loans, designed to inject capital directly into the expansion of manufacturing capabilities without the entanglements of ownership.

The CHIPS and Science Act, a landmark bipartisan initiative, allocates $52.7 billion to support domestic semiconductor research, development, and manufacturing.

This monumental investment is a direct response to global supply chain vulnerabilities exposed during the pandemic and a strategic move to counter China's burgeoning technological ambitions. Companies like Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and Micron have already been beneficiaries, receiving substantial funding to establish or expand their U.S.

operations.

Intel, as one of America's few remaining major domestic chip manufacturers, is a cornerstone of this national strategy. The company is poised to receive significant funding to expand its foundries and strengthen its position as a leading-edge chip producer. Despite Gelsinger’s innovative proposal, the administration's decision underscores a pragmatic approach: prioritize speed and efficiency in re-shoring critical manufacturing capabilities, ensuring funds flow quickly to where they can make an immediate impact on factory construction and job creation.

In the end, while Intel's proposal highlighted a novel path for public-private partnership, the U.S.

government opted for a clear, no-equity policy. This decision reaffirms its commitment to de-risking the supply chain and fostering a robust domestic semiconductor ecosystem through direct financial incentives, rather than through the complexities and potential delays inherent in becoming a corporate stakeholder.

The focus remains squarely on building the fabs, not buying the stock.