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Intel’s chief financial officer says the chipmaker agreed to sell stock to the Trump administration because last week’s deal provided assurance that the government wouldn’t rescind billions of dollars the Biden administration had promised the chipmaker.
“It was a significant amount of uncertainty as to whether we’d receive much of that cash,” CFO David Zinsner told a Deutsche Bank investment conference Thursday.
The Biden administration had promised Intel billions of dollars in subsidies, but Zinsner said it wasn’t clear whether Intel would hit all the milestones required to qualify for the money. And he said clawback provisions in the original agreement left the door open to Trump taking back $2.2 billion the government had already paid.
The Trump administration agreed Friday to invest $8.9 billion in Intel. In exchange, the federal government will receive a 10% stake in the company. Zinsner said Intel received the first $5.7 billion Wednesday night, helping shore up its balance sheet.
“It eliminated the need to access capital markets in any other way in the near term,” Zinsner said.
Friday’s deal included a provision that gives the government the option to buy more shares — at a discount — if Intel no longer has a majority stake in its factory business. Investment analysts interpreted that as a “poison pill” that would preclude a split of Intel’s chip design business from its manufacturing business, which it calls Intel Foundry.
Intel had considered a breakup last year, but Zinsner said Thursday that the company had essentially ruled out a split by the time it began talks about selling the government an equity stake.
“We do have high confidence we’re going to have this foundry business,” he said.
Also Thursday, Zinsner acknowledged that it has experienced difficulties reducing manufacturing defects in its forthcoming 18A manufacturing technology, due late in 2025.
“We would have liked to have gotten yield stabilized sooner,” he said, acknowledging those difficulties may have made it more difficult to attract other companies to use Intel’s factories for their own chips.
Intel’s next manufacturing node, called 14A, is on a better trajectory, according to Zinsner. It’s not due for a few more years, though, and Zinsner reiterated that Intel’s chips alone won’t be enough to make that next generation profitable — the company will need external customers to sign on.
Intel shocked Wall Street last month when it warned that the company might abandon advanced manufacturing without external customers for 14A, sending the stock down sharply. Zinsner indicated Thursday that Intel was caught off guard by that reaction but didn’t back away from the warning.
“The volumes required at these new nodes, in terms of the spending level, it’s hard to get (a return on investment) unless you’ve got more volume than we have,” Zinsner said.
Intel’s sales and stock price are down sharply over the past few years. The company is faltering on multiple fronts, from advanced manufacturing to chip design. It has failed to develop chips to serve the artificial intelligence market dominated by Nvidia even as it steadily lost market share in its PC and data center business to rivals like AMD.
Intel “fumbled the football” by not offering competitive products for advanced desktop computers, Zinsner said Thursday, adding that its data center chips are “still not there relative to the competition.”
New CEO Lip-Bu Tan has revamped Intel’s product pipeline, Zinsner said, and he said the company is confident it will address its gaps — though not right away.
“We will be adjusting the roadmap to make sure that we are listening to customers and delivering products that customers want and need. That takes a bit of time,” Zinsner said. “I think we’ll make some incremental improvement over the course of the next couple years but it’s going to be a multiyear process to get the portfolio to be really where we want it to be.”
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