Intel should spin off its foundry business, and the US government should subsidize cutting-edge chipmaking in the US via purchase guarantees for US-made chips
The best way to both save Intel and have leading edge manufacturing in the U.S. is to split the company, and for the U.S. government …
StratecheryBen Thompson
Context & Ripple Effects
This is a renewed version of the case made in 2021 for separating Intel’s manufacturing arm, now paired explicitly with demand-side support rather than subsidies alone. It follows Intel’s attempt to make foundry services a standalone strategic business, a shift described as Intel’s biggest business-model change in decades.
The proposal also sits within a U.S. policy debate that had already centered on direct chip-manufacturing support, including chipmakers’ call for $52 billion in manufacturing subsidies. The key distinction here is using government purchasing commitments to create predictable demand for U.S.-made leading-edge chips.
First-order effects
If adopted, a foundry spinoff would separate Intel’s manufacturing economics and capital needs from its chip-design business, making the foundry’s performance and customer strategy more visible.
Purchase guarantees would give a U.S.-based manufacturer contracted demand for qualifying chips, reducing the commercial uncertainty that a subsidy alone does not address.
Second-order effects
A more independent Intel Foundry would need to win external customers on service, process capability, and pricing, rather than relying primarily on Intel’s internal chip volumes.
Demand guarantees could shift the policy competition from funding fabs to securing chip supply, pressuring other prospective domestic manufacturers to seek comparable customer commitments.
Third-order effects
If replicated, this model would make government-backed demand a more central tool of semiconductor industrial policy, alongside grants and tax incentives.
The approach could reshape the industry around more separable design and manufacturing businesses, but only if guaranteed demand is matched by credible leading-edge execution and customer trust.
The trend: Semiconductor policy is moving from subsidizing factory construction toward underwriting demand for strategically important domestic capacity.
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Pat Gelsinger: So we believe very much that we're seeing a surge of interest there. Customers in advanced packaging are clearly interested in us for capacity, but increasingly for our most advanced packaging technology. So that's an area as the on-ramp for Intel Foundry.
Intel Honesty The best way to both save Intel and have leading edge manufacturing in the U.S. is to split the company, and for the U.S. government to pick up the bill via purchase guarantees. https://stratechery.com/...
Gelsinger indicated Intel's own chips had a below 0.4D0 as defect density on 18A which is in the 60% yield range. Broadcom's ability to port their libraries is likely the main issue here not necessarily 18A. Which is ironic since back in the day Broadcom prided iteself on its
New: Intel is hemorrhaging cash. It wants $ from the Chips Act, up to an $8.5b grant & $11b loan, ASAP Right now the company & Biden admin are stuck in a holding pattern — with no guarantee of when, or if, that money will be disbursed 🧵& free link: https://www.bloomberg.com/...
EXCLUSIVE: Biden's big bet on Intel to lead a US chipmaking renaissance is in grave trouble due to the company's mounting financial struggles, a potentially damaging setback for the country's most ambitious industrial policy in decades https://www.bloomberg.com/... via @technolog…