Why the US government is taking a stake in Intel

The Trump administration wants the United States to be the dominant force when it comes to artificial intelligence, and one way the administration hopes to achieve primacy is by bringing semiconductor manufacturing back to the U.S.

To help with that transition, President Donald Trump has introduced potential chip tariffs and policies in recent months meant to bring more semiconductor manufacturing stateside.

In late August, the Trump administration took an unprecedented step toward that goal when it converted an existing government grant, meant for domestic semiconductor manufacturing, into a 10% equity stake in Intel.

This deal was structured to grant the U.S. government additional equity in Intel if the company’s ownership of its foundry business — which manufactures custom chips for international customers — drops below 50% within the next five years.

But Intel isn’t the only U.S.-based semiconductor company, nor the only one that manufactures its chips overseas. So, how did Intel find itself as the main character in the Trump administration’s plans for AI dominance? Let’s take a look.

Chip context

First, some history: In March 2021, Intel launched its foundry business alongside a commitment to spend $20 billion building two new chip-manufacturing plants in Arizona.

A year later, the company announced its intent to acquire Tower Semiconductor, a company in the custom foundry industry, for $5.4 billion, but that didn’t pan out due to regulatory troubles, and the companies canceled the merger in August 2023.

Since then, Intel Foundry has struggled to gain momentum and there have been rumors that the business wasn’t able to get large customers on board.

In 2024, then-CEO Pat Gelsinger announced Intel was taking steps to transition Intel Foundry into an independent subsidiary. This came as board members called to spin the unit out entirely even as the company grappled with slowing growth, cost cuts, and massive layoffs.

In November 2024, there was a noticeable bright spot as the company reached a deal with the U.S. government for $7.86 billion in federal grants through the 2022 Chips and Science Act meant to boost domestic semiconductor manufacturing.

Then, Gelsinger suddenly retired in December 2024.

Lip-Bu Tan’s return

Intel announced that its former board member Lip-Bu Tan would rejoin the company as CEO in early March. Tan got right to work with a potential turnaround plan that centered on refocusing the company, shedding its noncore units, and significantly trimming its workforce.

In July, the company said it was scaling back some of its manufacturing projects, including its already-delayed $28 billion fabrication plant in Ohio.

A few weeks later, the Trump administration came knocking.

On August 6, Republican senator Tom Cotton penned a letter to Intel’s board of directors, asking about Tan’s ties to China, including his relationship with Cadence Design Systems, according to reporting from Bloomberg. Cadence had been charged with violating U.S. export controls to China, according to Bloomberg, and has sold tech to a military school in China. Tan was at Cadence’s helm for more than a decade.

The next day, August 7, Trump demanded that Tan resign “immediately,” accusing the CEO of being “highly conflicted,” though the president didn’t provide any evidence.

The following week, Tan headed to Washington, D.C., to meet with Trump to discuss ways the government and Intel could work together toward achieving the administration’s goals of reshoring semiconductor manufacturing in the U.S. Shortly after, rumors started to swirl that the U.S. government might be considering an equity stake in Intel.

On August 18, SoftBank said it was investing $2 billion in Intel. Four days later, the U.S. government announced its deal with Intel.

The deal ensures that Intel gets the grant money it was already awarded, and the Trump administration is claiming that it will be a passive investor that will vote alongside Intel’s interests. But will that actually help Intel?

What will happen next is a bit unclear.