The Trump administration surprised Wall Street and the tech industry last week with an unprecedented move: it announced plans to convert government grant money originally earmarked for Intel under Joe Biden-era semiconductor subsidy programs into a 10% equity stake in the company.

While it’s not clear if such a conversion is even legally or structurally possible, the bigger question remains: how would this solve Intel’s biggest problem—its struggling foundry business? Even Intel itself appears unconvinced.

Intel’s Foundry Woes: Billions Lost, Customers Elusive

Intel Foundry Services (IFS), designed to compete with TSMC and Samsung in the custom chip market, has been a major financial drag. Instead of luring marquee customers, Intel has lost out on major contracts—including one with Sony—according to Reuters.

The division has been bleeding money. In Q2 2025, Intel Foundry reported an operating income loss of $3.1 billion, alongside mass layoffs that disproportionately hit the foundry unit. The cracks have also shaken leadership: differences over how to fix IFS contributed to the resignation of board member Lip-Bu Tan in August 2024.

Industry experts argue the issue isn’t money—it’s mindset. Kevin Cassidy, managing director at Rosenblatt Securities, said that Intel has failed to adapt to being a customer-centric business.

“They didn’t understand customer service,” Cassidy said. “They’ve always manufactured internally where the manufacturing group was king. It’s hard to pivot when you think you know better than the customer.”

The Ripple Effect: Shareholder Dilution and Global Risk

Intel acknowledged potential downsides in an SEC filing this week. The equity conversion would dilute existing shareholders, reduce governance rights, and potentially alienate investors who already question Intel’s trajectory.

Cassidy was blunt:

“If I was a shareholder, I’d be disappointed. Intel gave up another 430 million shares at a 20% discount. That’s a bitter pill.”

Beyond shareholders, the move has global implications. 76% of Intel’s revenue comes from international markets, and foreign partners may balk at working with a company partially owned by the U.S. government. With trade wars and tech restrictions intensifying, Intel risks becoming caught in the geopolitical crossfire.

Mixed Signals: A Safety Net or a Symbolic Gesture?

Not all analysts see doom. Cody Acree of Benchmark Company argues that the government’s involvement, though imperfect, could be a small step toward restoring confidence.

“Intel has been struggling for the last decade. Government backing isn’t a fix-all, but it’s at least a signal of support rather than opposition,” Acree said.

Some strategists even believe the move could tie Intel more closely to Washington’s push for AI dominance and domestic semiconductor manufacturing.

Andrew Rocco of Zacks Investment Research points out that aligning with initiatives like OpenAI, SoftBank, and Oracle’s Stargate project could give Intel opportunities in the booming AI data center market.

Still, both Acree and Rocco caution: this isn’t a long-term solution. The real test will be whether Intel can win customers for its next-generation 14A chipmaking process.

The Bigger Picture: America First Meets Chipmaking Reality

The Trump administration insists it will be a passive investor. But history suggests corporate America often aligns itself with presidential priorities without needing much pressure. Already, U.S. companies have reshaped internal policies and messaging to echo pro-America sentiment since Trump’s return to office.

If the administration signals that American firms should buy Intel chips, it may not take much convincing. Yet even political favoritism won’t fix Intel’s innovation deficit or restore its edge against global leaders like TSMC, Samsung, and NVIDIA.

Intel has been burning cash and losing technological ground for years. What it needs isn’t just capital—it needs execution, customer trust, and breakthrough technology. Without that, government equity stakes will only buy time, not transformation.

FAQs

1. Why did the U.S. government take an equity stake in Intel?

The Trump administration converted planned semiconductor grants into a 10% equity stake, aiming to signal support for Intel and strengthen U.S. control over domestic chipmaking.

2. How does this affect Intel shareholders?

The deal dilutes existing shareholders, reduces governance rights, and was executed at a 20% discount, sparking concerns among investors.

3. Will this solve Intel’s foundry problems?

Unlikely. Experts say Intel’s issue isn’t a lack of money; it’s a failure to adapt to a customer-first model and deliver cutting-edge chip manufacturing on time.

4. How does this impact Intel’s global business?

Since 76% of Intel’s revenue comes from outside the U.S., foreign partners may hesitate to work with a company partially owned by the U.S. government amid rising trade tensions.

5. What is the key to Intel’s recovery?

Intel’s future hinges on securing customers for its 14A chipmaking process, competing with TSMC and Samsung, and reestablishing itself as a leader in the AI and semiconductor race.

Why U.S. Government Support Alone Won’t Fix Intel’s Problems