Biden Hurries to Distribute CHIPS Act Funds Before Exiting Office

As the end of a U.S. president’s term approaches, there is often a frantic effort to address any remaining tasks, especially in the face of an impending change in administration. President Joe Biden is no exception to this rule, as he seeks to finalize financial commitments before Donald Trump potentially takes office. A significant part of this rush involves a deal with Intel, a company that has recently struggled in the ever-competitive semiconductor industry. Under the CHIPS and Science Act, which Biden had previously championed to enhance domestic chip manufacturing, Intel is set to receive an $8 billion grant, intended to bolster its operations amid declining performance indicators. This move underscores the tension between urgent political objectives and the realities of investing in a company facing substantial challenges in its sector.

The CHIPS and Science Act, enacted in 2022, allocated substantial funding aimed at revitalizing semiconductor production in the U.S., with a particular focus on companies like Intel. The legislation designated $39 billion in manufacturing incentives, with Intel standing out as the largest recipient. Biden’s optimism surrounding this funding was palpable; he described the initiative as capable of transforming the semiconductor industry and counteracting years of manufacturing migration to Asia. However, given Intel’s recent performance, this investment raises concerns regarding the viability and efficacy of federal support for a company that has lost its market dominance over the years.

Once regarded as an unassailable leader in computing, Intel has faced a series of setbacks that have hampered its growth and market standing. Historically, the company benefited enormously from the rise of the PC era, producing components that accounted for a significant share of the market. Unfortunately, strategic miscalculations—like its decision to pass on Apple’s initial offer to supply chips for the iPhone—have significantly altered its fortune. The shift to Apple’s proprietary chips, among other competitive pressures, has left Intel trailing behind rivals such as Nvidia and AMD, who are reporting record earnings while Intel struggles more than ever.

The most recent figures from Intel highlight the gravity of the situation—the company recently posted a staggering third-quarter loss of $16.6 billion, marking the largest loss in its history. Concurrently, it has laid off significant portions of its workforce and has taken drastic measures, such as selling its California campus to cut costs. Meanwhile, the semiconductor industry is witnessing robust growth for competing firms, further compounding Intel’s woes. Reports indicate a potential reduction in the $8.5 billion grant being finalized as well, calling into question the government’s commitment to supporting a company in decline.

Critics, including Trump, have expressed skepticism about the wisdom of investing taxpayer money into a struggling company like Intel. Trump suggested that a better solution would involve imposing tariffs to incentivize companies to build their chip production capabilities domestically instead of doling out extensive grants. This debate highlights the broader narrative around government spending and industrial policy, raising questions about the efficacy of such financial incentives in revitalizing a flagging industry. As the Biden administration accelerates the finalization of this funding, the urgency appears driven as much by political expediency as by a strategic economic vision.

Ultimately, the CHIPS Act was originally framed as a means to secure America’s technological leadership and bolster its semiconductor capabilities. However, the reality of its implementation reveals that substantial funding often benefits already successful companies rather than resuscitating those like Intel in dire straits. Statements from Intel’s CEO reflect disappointment in the slow disbursement of funds and the overarching issues with the larger government approach to leveraging multi-billion-dollar grants to influence corporate decisions, raising pertinent questions about the role of government in managing private sector outcomes. As this episode unfolds, the ramifications of such government interventions in the free market will warrant close scrutiny, particularly concerning sustainability and fairness in fostering competitive industries.