Intel Corporation, the cornerstone of America’s semiconductor industry, is in the midst of a dramatic upheaval as it confronts hard realities in its foundry enterprise. Intel formally kicked off the race for the foundry segment back in March of 2021. This decision was meant to position the company as a leader in semiconductor manufacturing. The path has not been a straight line, leading to multiple strategic pivots and the need for government muscle.
That’s because in recent months, Intel’s foundry business has had real difficulty gaining any traction. Originally, the company intended to build two new chip manufacturing plants in Arizona, investing $20 billion there. It consistently had a hard time landing big catch customers to its services. This lack of commercial momentum began to worry observers as to the long-term commercial future of its foundry business. Things were made worse when CEO Pat Gelsinger retired on short notice in December 2024. This put the company at a crossroads.
Government Engagement
In light of these challenges, Lip-Bu Tan, a prominent figure in the semiconductor industry, traveled to Washington D.C. to engage with former President Trump. They vigorously engaged on what Intel’s role could be in collaboration with the federal government. Their dream job was to restore US based semiconductor manufacturing to winning levels. Why the U.S. government should NOT take an equity stake in Intel. This action is just one more piece of its larger plan to increase domestic production capacity.
In late August, the Trump administration made a strong move. They revamped one of their existing federal grants, originally designed to spur domestic semiconductor manufacturing, into a 10% equity stake in Intel. The agreement contains clauses that allow the government to increase its ownership. This possibly could be triggered if Intel’s share of its owned foundry business falls below 50% in the next five years. This early engagement highlights the U.S. government’s commitment to improving the country’s national security through an increase in local semiconductor production.
Strategic Restructuring
Inc., Lip-Bu Tan announced a refocusing strategy for Intel during the company’s annual investment revival plan. This approach means pumping out the old logos, divesting areas outside the defined focus and mission, and slashing the payroll. The decision to slam the brakes on Intel’s automotive business is indicative of a strategy shift towards focusing on core operations. In fact, layoffs have already started, hitting as much as 20% of the Intel Foundry workforce.
As part of this restructuring effort, Intel announced that it intends to spin off its network and edge group. These moves are intended to increase operational efficiencies and help fortify the core semiconductor business as competitive pressures increase and the industry enters a cyclical downturn. The firm has been putting the brakes on its passion projects in the manufacturing space. This includes the still-delayed $28 billion fabrication plant in Ohio, a reflection of their conservative strategy towards future investments.
Federal Support
Despite these headwinds, Intel rode a substantial wave of federal government support to victory. In November 2024, the company landed an astounding deal. Specifically, they’ve received $7.86 billion in federal grants already awarded via the 2022 Chips and Science Act. This funding is critical to help boost domestic semiconductor manufacturing and help Intel on its journey to recapture its competitive edge.
This mixture of government support and industrial policy 101-style restructuring could give Intel the space it needs to make a vigorous go at rebuilding its foundry business. The way ahead is still unclear as the company pours efforts into moving past the disaster and bringing in more customers.