Intel’s CHIPS Act Funding Limits Foundry Sales, Must Keep Majority Share in Spinoff

Following a new agreement with the U.S. government, which includes $7.865 billion in grants from the CHIPS and Science Act, Intel is now restricted from selling its Intel Foundry operations. Additionally, the company is obligated to retain a majority stake even if it decides to make Intel Foundry a publicly traded entity, according to the stipulations of the contract. Furthermore, the agreement prevents any third party from acquiring a significant portion of shares in Intel, as reported by Reuters.

Should Intel opt to transform Intel Foundry into a privately-held company, it must hold onto at least 50.1% of the ownership. In scenarios where Intel Foundry becomes a publicly listed company, no external party is allowed to possess 35% or more of the equity unless Intel remains the predominant shareholder. The agreement also mandates that Intel maintains control over Intel Foundry and any other entities that benefit from the funding. Moreover, the deal caps third-party ownership or voting rights in Intel at 35%.

Even though the agreement permits Intel to spin off Intel Foundry into a separate private entity (such as a joint venture) or as a public corporation, Intel must continue its wafer purchasing agreements with Intel Foundry. This ensures that Intel’s products will continue to be manufactured by Intel Foundry, securing the financial health of the company. Additionally, any major changes to the ownership or control of Intel Foundry must align with U.S. national goals. This is consistent with existing regulations, as significant deals involving large U.S. firms and foreign investors typically require approval from the Committee on Foreign Investment in the United States (CFIUS).

Moreover, Intel is obligated to continue its investment in cutting-edge chip manufacturing and semiconductor research on American soil. Specifically, the company is required to invest a minimum of $35 billion in R&D in the U.S. between 2024 and 2028. It also needs to develop, equip, and operate 12 fabrication and advanced packaging facilities across Arizona, New Mexico, Ohio, and Oregon.

Intel has not publicly commented on the details of this arrangement in its Securities and Exchange Commission filings. Meanwhile, a spokesman from the Department of Commerce indicated that the government is establishing control-related conditions with all direct grant recipients, emphasizing that these conditions are not unique to Intel.