The United States is building far fewer semiconductors today than it once did, leaving the country increasingly dependent on foreign producers.
The U.S.’s share of worldwide semiconductor manufacturing decreased from 37% in 1990 to less than 10% in 2022. To ameliorate this shift, Congress had taxpayers front $280 billion via the 2022 Creating Helpful Incentives to Produce Semiconductors Act, ostensibly to spur domestic production.
While revitalizing domestic semiconductor manufacturing is critical for U.S. national security and economic resilience, the CHIPS Act’s delivery was poorly calibrated to address these concerns.
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The CHIPS Act’s $250 billion package of federal investments — $280 billion including all programs and authorizations — sought to mitigate national security concerns and redefine domestic semiconductor manufacturing, research, and development. Unfortunately, as the Competitive Enterprise Institute points out, “without the market’s guiding forces of profits, losses, and prices, government officials are left in the dark about which projects are worthy of investment.”
Additionally, while Section 102(g) of the CHIPS Act bans stock buybacks expressly using CHIPS funding, it does not prevent receiving companies from using other funds for stock buybacks or prohibit companies that had already announced stock buybacks from receiving funds.
Instead, the CHIPS Notice of Funding Opportunity for Commercial Fabrication Facilities merely states that applicants “can complement their commitment to reinvestment with a commitment to refrain from stock buybacks for five years from the date of award.”
This issue, often called the fungibility problem, comes with all government contracts, where funding for one aspect of a business can be used in lieu of other funds for other projects. As EJ Antoni, chief economist at the Heritage Foundation, has said, “Once money is in circulation, its fungibility makes it uncontrollable—it ‘leaks.’”
Consequently, GlobalFoundries, which did not make such a commitment and received up to $1.5 billion in CHIPS Act funding in 2024, announced $500 million in share buybacks this year. This is after Global Foundries achieved its first two CHIPS Act milestones in 2025.
While the company’s expansions in New York and Vermont are commendable, critics are frustrated by the fungibility of government funding for corporations without prudent safeguards, viewing such developments as padding corporate pockets rather than supporting U.S. manufacturing.
Another example of the CHIPS Act’s shortcomings is Intel, which received approximately $7.8 billion of the $39 billion CHIPS Act subsidies for direct semiconductor manufacturing.
Despite Intel’s pledge to invest $100 billion domestically, it laid off 15,000 employees in 2024, faced a class-action lawsuit on potentially defective 13th- and 14th-generation CPUs, and litigated a shareholder lawsuit that accused the company of hiding information about Intel Foundry (its semiconductor manufacturing platform) that led to a $32 billion loss.
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In 2025, Intel’s full-year revenues came in at $52.9 billion, which, while flat year over year, is still a refreshing stabilization fueled by the AI boom and restructuring.
However, a strongly debated source of Intel’s 2025 growth stemmed from President Donald Trump’s apparent decision to use the Commerce Department’s “other transaction authority” to acquire a 10% stake in Intel through an $8.9 billion common stock investment.
Intel’s recent filing with the Securities and Exchange Commission changes the terms of its CHIPS funding so that the company received roughly $5.7 billion in exchange for giving the Commerce Department more than 274 million shares of common stock, a warrant to purchase up to roughly 240 million more shares of common stock under certain conditions, and issued into escrow more than 158 million shares of common stock pending disbursements from the CHIPS Act’s Secure Enclave program.
While the Commerce Department is allowed to provide financial assistance under certain interpretations of the act, the ownership stakes have raised concern among some in the GOP about this use of the CHIPS Act’s funding. Ostensibly, this fungible funding could be used to pay for Intel’s litigation woes or other non-manufacturing issues.
The Trump administration’s commerce secretary, Howard Lutnick, meanwhile, says that “Intel is excited to welcome the United States of America as a shareholder helping to create the most advanced chips in the world.”
On the private investment side, Intel has seen increased revenue from signing a multibillion-dollar deal with Amazon Web Services to manufacture chips for AWS’s cloud computing department. This deal included a pledge by AWS to invest $7.8 billion in its central Ohio operations and for Intel to, purportedly, complete its plant in the state — in New Albany — by 2030.
However, these developments on increased revenue or share price should be tempered by the reality that Intel’s sales in China accounted for 27% of 2023 revenue and that it houses critical Intel packaging facilities, presenting additional risks to supply chains.
While addressing scalability, performance, and interoperability issues, Intel’s continued reliance on private-public investments for much of its growth and supply chains in China for entire segments of the company’s production should have policymakers concerned.
Despite the CHIPS Act’s rocky start toward revitalizing the U.S. semiconductor industry, the country’s domestic semiconductor manufacturing has begun an arduous ascent. Regardless of whether the 10% Intel stake is upheld, U.S. policymakers must be vigilant in monitoring the domestic chipmaker’s incentive structures and should calibrate their expectations given the complex realities of supporting a competitive U.S. semiconductor industry.
Miles Pollard is a policy analyst for economic policy in the Center for Data Analysis at the Heritage Foundation. Connor Brown is a member of the Young Leaders Program at Heritage.