Intel to Receive $8.5 Billion in Grants to Build Chip Plants

President Biden plans to announce on Wednesday that his administration will award up to $8.5 billion in grants to Intel, a major investment to bolster the nation’s semiconductor production, during a tour of battleground states meant to sell his economic agenda.

Mr. Biden is set to make the announcement during a visit to the Intel campus in the Phoenix suburb of Chandler, Ariz., White House officials said. The award, which will go to the construction and expansion of Intel facilities around the United States, is the biggest the federal government has made with funding from the CHIPS Act, which lawmakers passed in 2022 to help re-establish the United States as a leader in semiconductor manufacturing.

The Biden administration, equipped with $39 billion in subsidies to distribute, is spearheading an ambitious effort to ramp up production of the tiny chips that power everything from smartphones to computers and cars. The effort is at the center of Mr. Biden’s goal to reduce America’s reliance on foreign countries: Although semiconductors were invented in the United States, only about 10 percent of the world’s chips are made domestically.

In addition to the grants, the federal government is planning to award Intel up to $11 billion in loans on what the company characterized as generous terms. Intel is also expected to claim federal tax credits that could cover 25 percent of the expense of its U.S. expansion projects, which are expected to cost more than $100 billion over five years.

The grants are intended to help fund the company’s construction plans in Arizona, Ohio, New Mexico and Oregon. The projects are expected to create more than 10,000 manufacturing jobs and roughly 20,000 construction jobs, according to Biden administration officials.

In Arizona, the money will help fund Intel’s recent construction of two advanced plants and the modernization of another facility. The money will also help establish an entirely new site near Columbus, Ohio, starting with two factories, in its first move to a new U.S. region in more than 40 years.

In Rio Rancho, N.M., Intel will use the federal funds to transform two plants into advanced packaging facilities, where chips are assembled together to enhance performance and reduce costs. The company will also expand and modernize an innovation hub in Hillsboro, Ore., which is expected to further the company’s technological leadership and development of new innovations.

Gina Raimondo, the secretary of commerce, whose department is overseeing the distribution of the grants, said the award would help ramp up the country’s production of the most advanced semiconductors, which are used in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware. The United States currently produces none.

“We rely on a very small number of factories in Asia for all of our most sophisticated chips,” Ms. Raimondo said during a call with reporters. “That’s untenable and unacceptable. It’s an economic security problem, it’s a national security problem, and we’re going to change that.”

Ms. Raimondo said the Intel award would be the single largest grant to a chipmaker under the new program. The investment will also help put the United States on track to produce roughly 20 percent of the world’s leading-edge chips by the end of the decade, she said.

Mr. Biden and his Democratic allies view the semiconductor investments as a key way to try to turn around perceptions of the economy among voters in battleground states like Arizona.

“We have not been talking to folks about the issues that President Biden has been delivering on, and that’s what we are determined to do,” Yolanda Bejarano, the Arizona Democratic Party chairwoman, said on Tuesday, adding that Democrats would need to talk more about the effects of the semiconductor investments.

Although Intel will have to meet certain milestones before the money is distributed, senior Biden administration officials said they expected the funds to start flowing to the company by the end of this year.

Patrick Gelsinger, Intel’s chief executive, told reporters in a briefing on Tuesday evening that the government incentives represented a proud moment for his company and a major achievement for politicians of both parties. Though satisfied with the incentives earmarked for Intel, he said officials might need to invest more in the industry to reverse decades of shifting investment from the United States to countries in Asia.

“It doesn’t get fixed in one three- to five-year program,” Mr. Gelsinger said. “I do think we’ll need at least a CHIPS 2 to finish that job.”

Intel is the fourth company to receive a federal award under the new program, and brings the total announced grants to more than $10 billion. The first three grants — to GlobalFoundries, Microchip Technology and BAE Systems — were to makers of legacy chips, which are created with older production processes but are still used in many products like cars and dishwashers.

Biden administration officials are expected to announce more awards in the coming months to other major chipmakers, including the Taiwan Semiconductor Manufacturing Company, Samsung and Micron Technology. Those companies have also made major investments in new or expanded semiconductor manufacturing plants in the United States in recent years.

The United States’ dependence on Asia for its chips has become even more pronounced with the rise of artificial intelligence; nearly all chips used to power the latest generative A.I. services were manufactured in Taiwan by T.S.M.C., though designed by the Silicon Valley company Nvidia.

Intel has been trying to change that by developing new manufacturing technology, beginning to build chips designed by other companies and lobbying heavily for the legislation. The investment in Intel is intended to help enable U.S. companies lead in the A.I. industry by ensuring there is a domestic supply of advanced chips.

About $50 million of federal funding will be set aside for Intel to spend on training and developing its work force. Many semiconductor companies and industry groups have voiced concerns about potential shortages of technicians, engineers and other workers to fill all of the positions that will be created once the facilities are constructed.

In total, private companies have announced more than $240 billion in semiconductor and electronic manufacturing investments since Mr. Biden took office, according to administration officials. Some chipmakers, however, have run into obstacles while trying to expand their domestic manufacturing capacity, resulting in delays.