Intel has been spared a split! What happens now?

A critical agreement has been reached between the Trump administration in the US and Intel regarding the future of the company’s chipmaking unit. According to the latest information, the agreement prevents Intel from selling or spinning off its foundry unit, which manufactures chips for external customers. Intel CFO David Zinsner shared the details behind this decision.

Intel’s spin-off prohibited

As part of the agreement, the US government acquires a 10% stake in Intel. Furthermore, the company faces serious penalties if it attempts to sell or spin off the foundry unit. Zinsner stated that the US government has the right to purchase an additional 5% stake at $20 per share over a five-year period if Intel reduces its stake in the unit below 51%.

The agreement also includes a $5.7 billion cash grant to Intel, previously pledged but unpaid under the US CHIPS and Science Act. This development comes despite Intel’s loss-making foundry unit and some analysts’ calls for its spin-off.

The company reported a $3.1 billion loss from this unit in the second quarter. The US administration prioritizes preserving Intel’s, and therefore the US’s, chip manufacturing capabilities to reduce its reliance on countries like Taiwan for chip production.

White House press secretary Karoline Leavitt stated that work on the agreement is still ongoing, and Intel has not commented beyond David Zinsner’s statements. This agreement is considered a demonstration of the US’s efforts to protect its national security and economic interests in a strategic area like chip manufacturing.