The outgoing Biden administration is reportedly going to cut downn the preliminary $8.5 million grant it awarded to Intel Corp. under the CHIPS Act, adding to the struggling U.S. chipmaker’s woes.

Intel, which is set to become the main beneficiary of the billions of dollars in grants earmarked for chipmakers under the CHIPS Act, is now expected to receive less than $8 billion, according to the New York Times, which cited four people familiar with the matter. The reduced number takes into consideration a $3 billion contract that was recently offered to Intel by the U.S. military.

The proposed reduction in the grant comes after Intel announced it would delay some of its investments in new chip plants under construction in Ohio. The company had originally said those fabs would be up and running by the end of 2025, but it now says they won’t be finished until the end of the decade. Intel has been under immense pressure in recent months, recently posting the biggest quarterly loss in its 56-year history. It has also revealed plans to cut more than 10,000 jobs in its biggest-ever round of layoffs.

The Times’ sources said reduced demand for Intel’s products was another factor in its decision to reduce the funding award. Though Intel has been striving to advance its manufacturing process to manufacture more powerful chips, it has struggled to convince enterprises that it can match rivals such as Taiwan Semiconductor Manufacturing Co.

President Biden had pinned his hopes on Intel being able to spearhead his push to ramp up domestic U.S. chip production, after the country experienced shortages of computer chips during the COVID-19 pandemic. In March, Biden met with Intel Chief Executive Pat Gelsinger to announce the CHIPS Act funding, expressing confidence in the company’s ability to transform the semiconductor industry.

The CHIPS Act is a bipartisan bill that went into effect in 2022, promising to dish out $39 billion in grants to chipmakers that are willing to help expand U.S. chip production, so the country can reduce its reliance on foreign suppliers. Other chipmakers, such as TSMC, GlobalFoundries Inc., Texas Instruments Inc. and Samsung Electronics Co. Ltd., have also been awarded billions of dollars in grants, though they’re set to receive less than Intel.

However, all of the awards announced so far are preliminary, as the U.S. Commerce Department has imposed stringent conditions on those companies. To unlock the funding, they must meet benchmarks that include constructing new chip fabs on U.S. soil, entering mass production and securing customer contracts.

Intel is still the biggest winner from the CHIPS Act, but it has struggled to meet those benchmarks because of its poor business performance. The initial $8.5 billion award was meant to support a planned expansion of Intel’s chip fabs in Arizona, New Mexico and Oregon, plus the two new facilities in Oregon. However, the company has since delayed some of those plans, complicating the award.

In addition to the federal grant, Intel was offered up to $11 billion in loans, plus a 25% tax credit for its U.S. chip factory investments. The company is also set to receive $3 billion from the U.S. military to create chips for the armed forces.

The White House insists that the CHIPS Act has already driven significant growth in domestic chip manufacturing, and points out that the U.S. will soon be the only country in the world to host fabs from all five of the world’s top chipmakers.

Photo: Intel