Intel Stock Under Pressure: Uncertainties and Production Problems Weigh on the Stock

Intel's stock faced further setbacks on Wednesday, closing the trading day with a 3.3% decline. A report from Bloomberg casts doubt on whether Intel will actually receive the anticipated funds of approximately $19.5 billion from the U.S. CHIPS and Science Act. Additionally, a Reuters report indicates that Intel's chip production for Broadcom was not successful. The U.S. aims to bolster domestic chip production, with Intel playing a central role in this strategy. As part of the CHIPS Act, Intel was supposed to receive $8.5 billion in direct financial aid and an additional $11 billion in loans from the government. This financial support would have made the company the largest beneficiary of the CHIPS Act. However, there are now concerns about Intel receiving the full funding. In light of significant financial challenges and considerations of spinning off the chip manufacturing business or selling the Altera unit, investors are unsettled. Intel has positioned chip manufacturing for third-party customers as a key growth driver. Yet, doubts about the feasibility of this plan are growing amid internal difficulties. The Reuters report exacerbates these concerns by highlighting the inadequate results of Broadcom's tests with Intel's 18A chip manufacturing process. Broadcom decided that the production process is not reliable enough to proceed to mass production. Intel is trying to catch up in competition with Taiwan Semiconductor Manufacturing (TSMC), but the report shows that Intel is still significantly lagging behind its rival in terms of production reliability. Improving competitiveness against TSMC in high-end chip manufacturing has always been a long-term project for Intel. Although domestic chip production is becoming increasingly important for economic and security reasons, garnering substantial government subsidies for Intel, the new reports of missed production targets and concerns about government funding create significant uncertainties regarding Intel's future in the chip manufacturing business.