Report: Pentagon backs out of Intel funding deal

However, the apparent decision by the DOD to pull funding shouldn’t have a major effect on Intel, said Alvin Nguyen, senior analyst at Forrester. “In terms of Intel’s ability to reinvent itself as a chipmaker for hire, it should not have any impact unless the reason for pulling the funding is due to a scandal,” Nguyen said. “Getting customers to use [Intel’s] existing and future fabrication services is based on whether or not they fit client needs.”

Nguyen noted that $2.5 billion is a fraction of the cost of a new fabrication plant. “The amount of funding should not materially impact how many plants they are able to update.”

The U.S. government hasn’t yet made a final decision on CHIP Act funding, suggesting the DOD is working with other government agencies to avoid redundant allocations, added Mario Morales, group vice president for enabling technologies and semiconductors at IDC.

Intel submitted four applications for U.S. government funding last year, and it wasn’t guaranteed to win all four, Morales said. Companies filed more than 400 applications for CHIPS Act funding.

The cut in funding from the DOD could create a minimal delay to Intel’s plans, given the five- to seven-year timeframe for building chip factories, Morales added. “A lack of funding by DOD means less focus by Intel on government- or military-related projects, or maybe a delay in the start of production of nodes suited for military grade process.”

Working with the DOD is more about “visibility than volume” for Intel, he added.