Intel seeking subsidies seen as 'consistent' with chip giant's strategy
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Intel (NASDAQ:INTC) shares appeared headed for a mild day of trading, Thursday, as the topic of government subsidies for the chipmaker garnered some attention on Wall Street.
Intel (INTC) Chief Executive Pat Gelsinger has been on a tour, of sorts, of government capitals, in search of subsidies to support the company in its various plans to invest in chip-development plants in the U.S. and abroad. Earlier this week, Intel (INTC) said it spend the next decade investing the equivalent of $88 billion in semiconductor manufacturing across Europe. That investment includes putting almost $19 billion into a massive new fabrication plant in Germany.
Along with its German investment plans, a report from Bloomberg said that Intel (INTC) is on track to nail down more than $5.5 billion in subsidies from Berlin in order to help it get started on its plant project in the country.
UBS analyst Timothy Arcuri said in a research note that the subsidies are "consistent" with Intel's (INTC) so-called "smart capex" plans to finance its IDM 2.0 strategy--IDM standing for "integrated device manufacturing"--of plant expansions around the world.
Arcuri added that a residual effect of the Intel (INTC) subsidies is that the chip giant could stretch out its capital spending plans, and be "a positive" for chip-equipment makers such as KLA (KLAC), Applied Materials (AMAT), Teradyne (TER), and, to lesser extent, Lam Research (LRCX).
Next week, Intel's (INTC) Gelsinger, and Micron Technology (MU) CEO Sanjay Mehrotra are slated to appear before the U.S. Senate Commerce Committee and explain why Congress should allocate $52 billion in subsidies for the building of chipmaking facilities.
As trading progressed, Intel (INTC) shares edged just below their breakeven point to $46.54.
Earlier this week, chip stocks took it on the chin as Citi analyst Christopher Danely issued a grim report on the state of the chip market, calling it "a den of bears" due to multiple issues on the economic and international fronts.