AsianFin -- The Trump administration is considering expanding a deal that allows it to take a stake in Intel Corporation to defense contractors, according to U.S. Commerce Secretary Howard Lutnick.

Credit：Lockheed Martin

Top officials at the Pentagon are “thinking about” whether the U.S. government should acquire equity stakes in leading defense contractors such as Lockheed Martin, said Lutnick in a CNBC interview on Tuesday.  “Oh there’s a monstrous discussion about defense,” Lutnick replied when asked about if the Trump administration would repeat the stake-taking move with other companies that do business with the government.

Calling the Intel deal “a great example”, Lutnick said he and U.S. President Donald Trump stuck the agreement with Intel to make the previous government subsidies awarded to the chipmaker fair for America. The CHIPS and Science Act of 2022 (CHIPS Act) introduced by former President Joe Biden gave Intel $11 billion grant at in exchange for nothing to help them build semiconductors in U.S., he said.

Lutnick described Lockheed Martin as “basically an arm of the US government”, noting the company makes 97% of its revenue from the government. “But what’s the economics of that? I’m going to leave that to my secretary of Defense and the deputy secretary of Defense.” he said. “These guys are on it and they’re thinking about it.”

“As we did in his first term, we are continuing our strong working relationship with President Trump and his Administration to strengthen our national defense,” Lockheed said in a statement later Tuesday.

Trump on Friday announced his administration now “fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future.” He in a social media post touted “a great deal for America” since the U.S. government “paid nothing for these shares” now valued at around $11 billion. He also highlighted significance of the deal as Intel is building cutting-edge semiconductors, which is “fundamental to the future of our Nation.”   

Intel later Friday unveiled some details of the agreement. The company suggested it agreed to give a nearly 10% stake to the Trump administration in exchange for a total of $11.1 billion funding under the CHIPS Act. 

Under the agreement, the U.S. government will make an $8.9 billion investment in Intel common stock on top of the $2.2 billion in CHIPS Act grants Intel has received to date. “The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program,” said Intel in a statement.

With the $8.9 committed investment, the U.S. government agreed to purchase 433.3 million primary shares of Intel common stock at a price of $20.47 per share, equivalent to a 9.9% stake in the company. The federal government thus became one of Intel’s biggest shareholders, and took the stakes at an over 17% discount from Intel’s closing on Friday. Shares of the company rose 5.5% that day following Trump’s announcement.

Lutnick on August 19 said Intel must give the U.S. government an equity stake in the company in return for the funds it was granted under the CHIPS Act. He assailed the act signed by former President Joe Biden for giving semiconductor manufacturers subsidies without any return for U.S. taxpayers.

The same day saw Lutnick was reported be working on how the U.S. federal government can receive stakes in exchange for funds under the CHIPS Act Incentives Program for companies such as  Micron Technology, Inc., Taiwan Semiconductor Manufacturing Co., (TSMC) and Samsung Electronics. U.S. Treasury Secretary Scott Bessent is also involved in the CHIPS Act discussions, but it is Lutnick who is driving the process, per the report, noting that the Commerce Department oversees the $52.7 billion CHIPS Act.