Intel in lead position for billions in funding for secure defense chip factories

Intel (NASDAQ:) is at the forefront of possibly receiving multi-billion-dollar government funding for secure microchip manufacturing plants serving the U.S. defense and intelligence, according to The Wall Street Journal, which cited people familiar with the matter.

These yet-to-be-revealed facilities are planned to be established as dedicated “secure enclaves,” as per the sources. The intention behind this is to curtail the U.S. military’s reliance on chips imported from East Asia, notably Taiwan, due to perceived threats of Chinese territorial aggression.

With financial backing from the Biden administration’s $53 billion Chips Act passed last year, the project may partly set up operations within Intel’s existing factory complex in Arizona, sources indicate.

The strategy demonstrates the U.S. government’s willingness to engage closely with the private sector to ensure access to chips, which are increasingly regarded as critical to global political influence and defense capabilities. Chips are essential for artificial intelligence, espionage and cyberwarfare, and are key components in sophisticated military hardware like modern fighter jets and missiles.

While the specific funding amount from the Biden administration is not yet finalized, sources knowledgeable about the matter suggest that these facilities may require an investment of between $3B and $4B. This funding is expected to be allocated from the $39B authorized for manufacturing grants under the Chips Act.

Commerce Department, National Intelligence, and Defense officials are currently in talks with Intel about a chip-making project, with decisions pending. The Commerce Department’s CHIPS Program Office is set to distribute manufacturing grants soon, drawing considerable interest with over 500 entities expressing interest, and more than 130 having submitted applications or pre-applications for funding.

Intel is poised to be a major beneficiary, potentially gaining billions in grants for new manufacturing plants it’s establishing in states like Ohio and Arizona, beyond just the secure-enclave initiative.

On this secure-enclave matter, Intel has withheld comments. Similarly, the Commerce Department has not issued a statement, and the Defense Department has redirected inquiries to Commerce.