Intel to get plenty of help paying for $20B project

Intel’s $20 billion project in Licking County won’t cost the Silicon Valley semiconductor company $20 billion. Far from it.

Federal subsidies and tax credits from the recently enacted CHIPS Act, state and local aid, money from Jobsohio and potential infrastructure partnerships like the one Intel struck for its expansion in Arizona promise to shave billions off the cost of the two factories, called fabs, that the company is building in New Albany.

All of that aid is part of a push by the federal government to bring back production of the tiny devices that power everything from cell phones to military equipment to the U.S.

“These companies are getting well rewarded for locating fabs in the U.S.,” said Robert Maire, president of Semiconductor Advisors in New York City that provides consulting services to the industry.

Take the 25% tax credit from the federal legislation, formally called Creating Helpful Incentives to Produce Semiconductors, that was passed by Congress last year.

In general, that legislation could reduce the cost of a $10 billion fab, what Intel says each fab will cost in New Albany, by $2.5 billion, Maire said.

The Congressional Budget Office has said the tax credits are expected to be worth $24 billion over five years.

Each fab costs about $1 billion to $2 billion to build, Maire said. The remaining cost is for the equipment inside that produces the semiconductors.

The legislation also comes with grants totaling $52.7 billion. The Commerce Department is expected to release guidance on how companies can apply for the grants in February, and Intel told analysts on a conference call last month that it expects money to be awarded this year to offset some of its investment costs.

The Commerce Department estimates that between federal subsidies and the tax credits, the cost of building and equipping factories will fall 30% to 50%, making the industry in the U.S. more competitive with the rest of the world. The industry has long said it has been far cheaper to build and operate plants overseas, and that’s why aid is necessary to bring production back to the U.S.

Beyond the grants and tax incentives, Intel expects to raise money from partnerships and commitment from companies that are willing to make advance payments to secure capacity in the new plants.

In Chandler, Arizona, for example, Intel struck a deal with Brookfield Infrastructure Partners to jointly fund Intel’s expansion there in which Brookfield is investing up to $15 billion for a 49% stake in the manufacturing expansion in Chandler with Intel having a 51% stake. Intel has said it expects another such deal this year.

“We do believe that we’ll have the capital necessary to meet both our near-term but more importantly, the strategic long-term investments . ... We’re on track with the capital, the builds that allow us to restore leadership in our process technology as well as have the factory capacity to both deliver that for our products as well as for our foundry customers,” Intel CEO Pat Gelsinger told analysts on a conference call to discuss the results.

Meanwhile, Ohio is stepping up with $2 billion in incentives, and Jobsohio, the state’s economic development group, is spending $150 million, money that Intel used to buy the land where it is building the fabs and for workforce development.

New Albany has offered Intel property tax abatements on the site.