Intel’s $3 Billion Pentagon Chips Grant, China-Russia Military Tech Exchanges, and a Maxim Gun Moment

This week, Intel announced that it will receive a $3 billion grant from the US government to produce semiconductors for military and intelligence purposes. The grant is a part of the new Secure Enclave program, designed to ensure the US has reliable domestic sources of advanced semiconductors.

The US and others are concerned that China would actively support Russia with technology for military purposes.

But first, in a guest essay in The New York Times, Raj M. Shah, managing partner of Shield Capital, and Christoffer M. Kirchhoff, who helped to build the Pentagon’s Defense Innovation Unit, compare the current change in character of war to the moment when the British South Africa Company used five Maxim guns, the world’s first fully automatic weapon to, as they write “help repel over 5,000 Ndebele warriors, some 1,500 who were killed at the cost of only a handful British soldiers.” They conclude that the US military is not ready for this Maxim gun moment that they say has already arrived:

The Big Story

Intel’s $3 Billion Pentagon Chips Grant

On Monday, Intel announced it will receive a $3 billion grant from the US government to produce advanced semiconductors for military and intelligence purposes. The grant is part of the Secure Enclave effort, designed to reduce reliance on foreign technology.

As part of the 2022 Chips and Science Act, Lawmakers set aside $3.5 billion to ensure that the US has reliable domestic sources of advanced semiconductors for military and intelligence applications, reducing the dependency on foreign manufacturers such as TSMC and Samsung Electronics. Even if there are concerns about reliance on a single company, Intel has emerged as the frontrunner for the program.

Intel first started working with the DoD in 2020, when the company signed into the Ship program, which focused on new chip packaging methods. Since 2021, Intel has also participated in the Ramp-C program, providing commercial foundry services to develop custom circuits for military systems.

Intel has faced revenue and profit declines since peaking around 2018 due to competition from companies like NVIDIA, economic challenges, and significant investment in R&D. The company recently reported larger-than-expected losses and has had to reduce its workforce. Intel’s stock price, which has dropped more than 61% this year, rose by 6.5% to $20.04 on Monday in response to the news of the $3.5B Pentagon deal, reflecting investor optimism regarding the new funding.

“Today’s announcement highlights our joint commitment with the US government to fortify the domestic semiconductor supply chain,” Chris George, president and general manager of Intel Federal, said in a statement. In a joint statement, the Departments of Defense and Commerce said the award will “build on Intel’s work with the DoD and will further strengthen our national security.”

China and Russia’s Military Tech Exchanges

On Tuesday, the US Deputy Secretary of State Kurt Campbell stated that China is supplying equipment that helps the advances of the Russian military in Ukraine.

“These are not dual-use capabilities," Campbell told the Financial Times. "These are component pieces of a very substantial effort on the part of China to help sustain, build, and diversify various elements of the Russian war machine.”

Campbell said that Russia, in turn, is aiding China in other areas, such as submarine, aeronautic, and missile technologies. This is the first time a US official has said China is directly providing lethal aid to Russia against Ukraine.

Last week, NATO Secretary General Jens Stoltenberg last week called on China to stop supporting Russia's war in Ukraine and said Beijing's assistance has been a significant factor in the continuation of the conflict.

This week, Reuters also published a story based on intelligence sources that Russia started producing long-range attack drones called the Garpiya-A1 last year using Chinese engines and parts. The drones have already been deployed in Ukraine, and more than 2,500 were produced in the year to July.

The Chinese foreign ministry said in a statement that Beijing strictly controls the export of items with potential military applications, including drones.

"With regard to the Ukrainian crisis, China has always been committed to promoting peace talks and political settlement," the statement said. It added that there were no international restrictions on China's trade with Russia.

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