Intel has delayed two mega chip-making factories in Germany and Poland
AFP

The U.S. government is reportedly planning to reduce the federal CHIPS grant to Intel, leading to a decline in its funds from $8.5 billion to below $8 billion.

The reduction has taken into consideration the contract worth $3 billion that was offered to Intel to develop chips for the Pentagon, people familiar with the matter told the New York Times. However, the exact amount that will be slashed from the grant was not revealed.

The Biden administration's decision came after Intel, which was the largest recipient under the CHIPS grant, confirmed a delay in certain planned investments in Ohio. The project, which was initially supposed to finish by 2025, was moved to the "end of the decade."

In October, Intel posted its biggest quarterly loss in the entire 56-year history of the company, facing more pressure than ever to reduce its costs.

The loss was a setback to the U.S. government, as merely six months ago, President Joe Biden had awarded the tech company almost $20 billion in grants and loans to boost the domestic semiconductor market, Reuters reported.

The government had announced in March that they have a preliminary agreement of $8.5 billion in grants and about $11 billion in loans. A part of the funds would be used to build two more factories and to revamp an already existing site.

The funding for Intel was part of the 2022 CHIPS and Science Act. The CHIPS Act provided $39 billion in funding to subsidize the chip-making industry, in order to eventually establish a non-reliance on foreign companies to provide for critical electronic components.

Even though Intel was the one that lobbied aggressively for the passage of the CHIPS Act, it was now facing difficulty in claiming its final award due to its struggles in its business operations.

The tech giant has also been struggling to catch up with Taiwan Semiconductor Manufacturing Company (TSMC) and failing to convince customers of their potential to match up to the Asian company's chip quality.

The U.S. Commerce Department has also finalized contracts to grant $6.6 billion to TSMC, as part of its CHIPS Act. TSMC is reportedly investing $65 billion to construct factories in Arizona.

Intel