Intel Corporation (INTC, Financial) has entered into a significant Direct Funding Agreement with the U.S. Department of Commerce, securing up to $7.8 billion in direct funding and an additional $65 million for workforce development. This agreement, announced on November 25, 2024, is part of the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act), aimed at enhancing the domestic semiconductor industry.
The funding will support Intel's ambitious projects involving the construction, modernization, and operation of twelve microchip fabrication and advanced packaging facilities across Arizona, New Mexico, Ohio, and Oregon. The agreement outlines that the disbursement of funds will be milestone-based, reimbursing Intel for eligible expenses already incurred.
Key conditions of the agreement include restrictions on dividends, share repurchases, and expansion of semiconductor manufacturing in certain foreign countries. Intel is also committed to investing at least $35 billion in U.S. research and development from 2024 through 2028. The agreement further imposes limitations on joint research with certain foreign entities and the use of prohibited equipment.
Additionally, the agreement includes an "Excess Return Sharing Requirement," where Intel may need to share a portion of the project's cumulative realized unlevered free cash flow with the DOC if it exceeds specified thresholds. This requirement is capped at 75% of the awards received for the applicable project.
In case of significant breaches, such as non-compliance with CHIPS Act requirements or change of control restrictions, the DOC reserves the right to terminate the agreement, demand repayment, or impose additional conditions.
This strategic partnership underscores Intel's commitment to bolstering U.S. semiconductor manufacturing capabilities, aligning with national interests to secure a robust and self-reliant semiconductor supply chain.
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