Intel reportedly in lead to make US military chips as its Foundry business gains steam

Intel is poised to land billions in funding to produce US government and military microchips, following signs the tech giant’s pivot to semiconductor manufacturing is beginning to bear fruit.

The Wall Street Journal reported that the program, funded by the White House’s $53 billion CHIPS Act, would likely involve Intel’s Arizona manufacturing complex. Sources who spoke with the paper said the new facilities could run in the neighborhood of $3 billion–$4 billion, although negotiations with various government agencies remain ongoing.

As the Journal noted, Senators Jack Reed, Roger Wicker, and Maria Cantwell authored a letter to Secretary of Commerce Gina Raimondo last month questioning whether a contract for exclusive defense-oriented manufacturing facilities is preferable to funding the broader supply chain.

Granting exclusive contracts “would limit funding for other projects that would create a diversified domestic supplier base of semiconductors critical to the defense industrial base,” the senators wrote, reported the Journal. The economics of such a facility may also be uncertain, as defense constitutes just 2% of the chip market, the paper reported.

Intel stock has weathered years of decay due to factors including missed product launches and a collapse in the PC market, which is only now showing signs of cautious optimism. CEO Pat Gelsinger has staked his tenure on the foundry strategy of competing with firms like TSMC to manufacture semiconductors for other companies. While the strategy has run into obstacles, the company showed positive signs in May, partially due to surging interest in the kind of AI chips it makes.

In its Q3 earnings report, Intel managed to beat consensus expectations from analysts. The tech giant raked in $14.2 billion in revenue on expectations of $13.5 billion, and earnings per share of $0.41 were nearly double expectations of $0.22. Intel’s PC business beat predictions, while the data center business slumped.

As Barron’s reported, the real news item is that Intel’s nascent Foundry chip-manufacturing business appears to be gaining steam. CFO David Zinsner told the magazine it had signed up three customers for the Intel 18A process (its most advanced line of chips) during the quarter, although the clients want to remain anonymous.

“While the industry has seen some wallet share shifts between CPU and accelerators over the last several quarters, as well as some inventory burn in the server market, we see signs of normalization as we enter Q4,” Gelsinger told attendees on the Q3 earnings call.