Pentagon Abandons Plan to Allocate $2.5 Billion for Intelligence Grant

Pentagon Abandons scraps $2.5B intelligence grant plan

In a surprising turn of events, the Pentagon Abandons its plan to allocate up to $2.5 billion in a chip grant to Intel Corp., sources familiar with the matter disclosed. The sudden withdrawal of support places the burden on the Commerce Department to address the resulting funding gap, raising concerns within the tech industry.

Implications for Intel’s Funding Landscape

This decision, shrouded in confidentiality due to the sensitivity of the discussions, has the potential to disrupt Intel’s anticipated federal funding, sparking speculation about its repercussions within the tech sector. Beyond the defense allocation, Intel had been eyeing incentives surpassing $10 billion under the Chips and Science Act, setting the stage for a contentious situation.

“The undisclosed decision might jeopardize Intel’s expected federal funding, triggering speculation and potential disruptions in the tech industry,” according to Bloomberg Subscription.

Defense Funding Dynamics Unravel

President Joe Biden signed a recent spending package into law, with a pivotal component being defense funding. This allocation earmarked $3.5 billion for Intel to spearhead the production of advanced defense and intelligence-related semiconductors. However, the sudden withdrawal of Pentagon support has left the industry in flux, prompting a reevaluation of funding distribution strategies.

Commerce Department Steps In

The Pentagon Abandons eleventh-hour decision to abandon its commitment has left Commerce, entrusted with disbursing Chips Act grants, grappling with shockwaves through the corridors of power. Urgent action is now necessary to plug the financial gap. Lawmakers, reacting swiftly to the crisis, have directed the Commerce Department to utilize alternative Chips Act funds to offset the shortfall.

Industry-Wide Ripple Effect

The ramifications of this funding shortfall extend beyond Intel, casting a shadow of uncertainty over the entire semiconductor industry. The Chips Act is celebrated as a groundbreaking piece of legislation designed to rejuvenate domestic semiconductor manufacturing. However, it now encounters unforeseen challenges, leaving stakeholders scrambling to navigate this latest hurdle.

Strategic Shifts and Unease Among Rivals

Industry observers speculate that the altered funding landscape could potentially result in a greater allocation of Intel’s Chips Act funds. This shift may prioritize military applications over other sectors. This could divert resources away from commercial ventures. This strategic pivot aligns with national security imperatives but has stirred unease among rival chipmakers. Globalfoundries Inc., in particular, fears the repercussions of an uneven playing field.

Market Response and Investor Concerns

In response to the unfolding developments, Intel shares experienced a dip of up to 1.7% in after-hours trading. This followed Bloomberg’s report, underscoring investor concerns regarding the company’s financial outlook and strategic positioning.

Uncertainties Ahead for the Chips Act

As the industry grapples with the fallout from the Pentagon’s decision, uncertainties loom large over the fate of the Chips Act and its broader implications for national security and economic competitiveness. With bipartisan support for the legislation, policymakers find themselves under mounting pressure. They must navigate these turbulent waters and chart a course that ensures the long-term viability of the domestic semiconductor industry.

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