The Trump administration aims for the United States to become the dominant force in artificial intelligence. A key part of this strategy involves bringing semiconductor manufacturing back to American soil. To facilitate this transition, President Donald Trump has introduced potential chip tariffs and policies in recent months designed to encourage domestic semiconductor production.
In a significant move toward this goal, the Trump administration converted an existing government grant for domestic semiconductor manufacturing into a 10% equity stake in Intel in late August. This deal was structured to grant the U.S. government additional equity in Intel if the company’s ownership of its foundry business drops below 50% within the next five years. This foundry unit manufactures custom chips for international customers.
Intel is not the only U.S.-based semiconductor company, nor is it the only one that manufactures its chips overseas. This raises the question of how Intel became the main character in the Trump administration’s plans for AI dominance.
Some history provides context. Intel launched its foundry business in March 2021 alongside a commitment to spend $20 billion building two new chip plants in Arizona. A year later, the company announced its intent to acquire Tower Semiconductor, a company in the custom foundry industry, for $5.4 billion. That deal was later canceled in August 2023 due to regulatory troubles.
Since then, Intel Foundry has struggled to gain momentum, with rumors that the business failed to secure large customers. In 2024, then-CEO Pat Gelsinger announced Intel was taking steps to transition Intel Foundry into an independent subsidiary. This occurred as board members called to spin the unit out entirely while the company grappled with slowing growth, cost cuts, and massive layoffs.
A noticeable bright spot arrived in November 2024 when the company reached a deal with the U.S. government for $7.86 billion in federal grants through the 2022 Chips and Science Act, which is meant to boost domestic semiconductor manufacturing. Then, Gelsinger suddenly retired in December 2024.
Intel announced that its former board member Lip-Bu Tan would rejoin the company as CEO in early March. Tan immediately began working on a potential turnaround plan centered on refocusing the company. This involved shedding its noncore units, significantly trimming its workforce, and scaling back some manufacturing projects, including an already-delayed $28 billion fabrication plant in Ohio.
A few weeks later, the Trump administration became involved. On August 6, Republican senator Tom Cotton penned a letter to Intel’s board of directors asking about Tan’s ties to China, including his relationship with Cadence Design Systems. According to reports, Cadence had been charged with violating U.S. export controls to China and had sold technology to a military school there. Tan had been at Cadence’s helm for more than a decade.
The next day, August 7, Trump demanded that Tan resign immediately, accusing the CEO of being highly conflicted, though no evidence was provided. The following week, Tan traveled to Washington, D.C., to meet with Trump to discuss ways the government and Intel could work together to reshore semiconductor manufacturing. Shortly after, rumors swirled that the U.S. government was considering an equity stake in Intel.
On August 18, SoftBank said it was investing $2 billion in Intel. Four days later, the U.S. government announced its deal with the company. The deal ensures Intel receives the grant money it was already awarded. The Trump administration claims it will be a passive investor that votes alongside Intel’s interests. Whether this will actually help Intel remains unclear, and what happens next is uncertain.