Intel warns US stake could hurt international sales, future grants

[WASHINGTON] Intel said on Monday (Aug 25) that the US government’s 9.9 per cent stake in the chipmaker could pose risks to its business, from potentially harming international sales to limiting its ability to secure future government grants.

The company laid out new risk factors in a securities filing after the government decided to convert US$11 billion in government grants into an equity stake in Intel, the latest extraordinary intervention in corporate America by President Donald Trump.

Separately, Intel CEO Tan Lip-Bu said in a video posted on Monday by the Commerce Department that the company did not need the government funding.

“I don’t need the grant,” Tan said. “But I really look forward to having the US government be my shareholder.”

But the filing from Intel raised questions about the US investment. Intel noted, for example, that it is uncertain if the deal may result in other government entities trying to convert existing grants into equity investments or if they might be unwilling to support future grants.

Intel shares will be acquired with the US$5.7 billion in unpaid grants from the 2022 CHIPS and Science semiconductor subsidy law and US$3.2 billion awarded to Intel for the Secure Enclave programme last year under Trump’s predecessor, Democratic President Joe Biden.

“To the maximum extent permissible under applicable law,” Intel’s obligations under the CHIPS Act will be considered discharged, barring the Secure Enclave program, according to the filing.

Intel’s non-US business may also be impacted by the US government being a significant stockholder as this could subject the company to additional regulations or restrictions such as foreign subsidy laws in other countries, the filing said.

Sales outside the US accounted for 76 per cent of its revenue last year while revenue from China contributed 29 per cent to total revenue. Trump’s deal with Intel came after Tan had a meeting with the president, who had demanded Tan’s resignation over his ties to Chinese firms.

The company also said the shares to be issued to the US government at a discount to the current market price are dilutive to existing stockholders. The government is purchasing Intel shares at a US$4 discount to Intel’s closing stock price of US$24.80 on Friday. Intel shares rose 2 per cent in early trading on Monday to US$25.25.

The government’s substantial additional powers over laws and regulations impacting Intel may limit the company’s ability to pursue transactions that benefit shareholders, the filing said. REUTERS