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Why Government Equity Won’t Solve Intel’s Foundry Crisis

Cansin Cengiz

26 Aug 2025 — 2 min read

Why Government Equity Won’t Solve Intel’s Foundry Crisis

The U.S. government made headlines recently with a controversial proposal: turning Intel’s expected grant money into a 10% government equity stake. While this marks a historic shift in U.S. industrial policy, it raises more questions than solutions—especially for Intel’s core challenge: its struggling foundry business.

Uncertain Policy, Uncertain Impact

It’s still unclear whether converting government grants into equity is even possible under current laws. But what’s more concerning for investors and tech leaders is how this move addresses Intel’s fundamental issues. Intel’s foundry operation—manufacturing chips for outside customers—has struggled to secure major contracts and remains unprofitable, reporting a $3.1 billion operating loss in Q2 2025. The division has faced layoffs and missed out on high-profile deals, such as with Sony.

Intel Foundry’s losses continue to mount, putting pressure on the company’s overall performance.
Leadership turnover and disagreements about the foundry business’s future have shaken confidence.
Industry analysts argue that Intel’s challenges are operational, not financial—changing the business model and culture is key.

Shareholder and Global Risks

In recent regulatory filings, Intel warned that this equity deal could dilute existing shareholders and reduce their influence, potentially eroding investor trust. With 76% of Intel’s revenue coming from outside the U.S., there’s also the risk of alienating international partners wary of U.S. government ownership amid ongoing trade tensions.

What Do Analysts Think?

Market analysts are split. Some, like Kevin Cassidy from Rosenblatt Securities, doubt the government’s involvement will solve Intel’s core problems, which stem from customer service failures and an insular manufacturing culture. Others, like Cody Acree of Benchmark Company and Andrew Rocco at Zacks, see potential benefits in government backing, but caution that it’s no silver bullet.

A government stake could help reassure partners and investors, but lasting change requires internal transformation.
Positive sentiment may help in the short term, especially as the U.S. pushes for domestic semiconductor leadership and AI innovation.
However, the real test will be market acceptance of Intel’s next-gen 14A chipmaking process, which hinges on customer demand.

Beyond Money: The Real Solution

Although government support signals confidence, Intel’s turnaround depends on its ability to win back customers, adapt to a competitive global market, and deliver on innovation. The company’s history of manufacturing for itself rather than for clients has been a stumbling block in a world where customer focus is paramount. Until Intel addresses these cultural and operational issues, no amount of government money or equity will be enough to restore its leadership in the semiconductor industry.