In recent years, Intel has faced harsh scrutiny for what many view as a steady decline from its once-dominant position in the semiconductor industry. However, as Intel’s troubles mount, a new narrative is emerging—one where the company’s survival is crucial not only for its stakeholders but also for the geopolitical stability of the United States and its competitive edge in the global semiconductor race.

The U.S. might have no choice but to rescue Intel, regardless of the company’s past missteps.

Catch our talk on Intel’s struggles—Is it too big to fail for national security?

From Tech Titan to Troubled Waters

Intel’s fall from grace began in the early 2000s, a period marked by key strategic mistakes. The company missed the explosion in demand for mobile chips, failing to secure critical contracts like the one Apple handed to Samsung for its iPhone processors. Worse yet, Intel failed to capitalize on the AI revolution. Competitors like Nvidia designed chips optimized for AI and machine learning, leaving Intel’s processors technologically lagging by several years. As a result, by 2021, Intel’s chips had fallen two generations behind, a humiliating position for a company once considered the industry leader.

Despite these failures, Intel remains vital to the U.S. semiconductor ecosystem. In an interview with Fortune, CEO Pat Gelsinger acknowledged the immense challenge the company faces: “Thirty years of poor economic policy cannot be fixed in a three- to five-year CHIPS One program” . He’s referring to the government’s $52 billion CHIPS and Science Act, which was passed to boost domestic chip manufacturing and of which Intel is a primary beneficiary.

A Geopolitical Lifeline

The importance of semiconductors to national security cannot be understated. Semiconductors power everything from smartphones to defense systems, and the U.S. is currently dependent on foreign manufacturers, particularly Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung. This reliance has become a significant geopolitical risk, particularly as China continues to ramp up its efforts to produce its own chips and has been saber-rattling about invading Taiwan, a key player in global semiconductor production.

Commerce Secretary Gina Raimondo emphasized this concern earlier this year: “We cannot allow ourselves to be overly reliant on one part of the world for the most important piece of hardware in the 21st century”. The CHIPS Act is a direct response to these concerns, with Intel set to receive up to $20 billion in direct funding and loans to construct new fabs (fabrication plants) in Arizona and Ohio. While TSMC and Samsung are also building facilities in the U.S., Intel’s domestic presence offers a critical advantage in insulating American interests from potential supply chain disruptions in Asia.

The Cost of Catching Up

Even with government support, Intel’s journey back to competitiveness is steep and expensive. In 2024, Intel’s capital investments reached nearly $16 billion annually, and the company plans to lay off 15% of its workforce as part of a broader restructuring effort. Gelsinger has made it clear that Intel’s rehabilitation won’t be complete until 2030 or later, acknowledging that the company’s financial health is still years away from recovery.

A critical element of Intel’s strategy is its foundry business—making chips for other companies. Historically, Intel has struggled in this area. The foundry business lost $5.3 billion in the first half of 2024, after losing $7 billion in 2023. Many analysts remain skeptical of Intel’s ability to compete in this space, especially against industry giant TSMC. Citigroup’s semiconductor analyst Christopher Danely offered a blunt assessment: “Their biggest problem is foundry. There’s a very small chance it will succeed” .

Still, Gelsinger believes that Intel’s foundry and product businesses are “better together,” a strategy he believes will allow Intel to innovate faster by co-developing technology across multiple platforms. Whether this strategy will pay off remains to be seen, but it’s clear that Intel is placing big bets on its ability to catch up.

Geopolitics and the Semiconductor Race

While Intel’s commercial competitiveness is in question, its geopolitical significance is not. The semiconductor race has become a proxy for the broader U.S.-China technological rivalry, and Intel sits squarely in the middle. If China achieves its goal of becoming self-sufficient in leading-edge chip production by 2027, or worse, if it invades Taiwan and takes control of TSMC, Intel’s role as a U.S.-based chipmaker will become even more critical.

The implications of such a scenario are far-reaching. As Fortune noted, “If China were to take over Taiwan, it would presumably take control of TSMC” . What happens then? Would the U.S. take over TSMC’s operations in Arizona? Or would Intel benefit from an influx of government contracts and funding as America seeks to shore up its domestic supply?

The reality is that Intel’s future is tied to broader national security concerns. Peter Orszag, CEO of Lazard, highlighted this growing trend in a recent Foreign Affairs article, noting that corporations like Intel have become “both the objects and instruments of foreign policy” . Intel is no longer just a company—it is a strategic asset.

The Path Forward: Does Intel Have a Chance?

Given the geopolitical stakes, the U.S. may have no choice but to continue supporting Intel, regardless of its commercial success or failures. Yet, there are reasons for cautious optimism. Bob Rogers, Intel’s former chief data scientist, pointed to the company’s AI accelerators as a potential game-changer. Intel’s Gaudi chips are specifically designed for AI workloads and could offer a lower-cost alternative to Nvidia’s GPUs, which currently dominate the AI hardware market .

Still, the road to recovery will be long, and the stakes are high. Intel needs to regain trust with investors, customers, and the broader market. Its recent stumbles—most notably its issues with Raptor Lake CPUs and its ill-fated decision to pass on a $1 billion investment in OpenAI—have hurt its credibility. The company has also been hit with class-action lawsuits over defective chips, adding to its list of woes.

A Company Too Big to Fail?

The question is no longer just about Intel’s future—it’s about America’s future in the semiconductor industry. Like the financial institutions deemed “too big to fail” in 2008, Intel might have reached a point where its collapse would pose too great a risk to national security and technological dominance.

Pat Gelsinger may not have the luxury of time or easy fixes, but he seems to understand the magnitude of Intel’s current position. As he noted earlier this year, “We’re not just fighting for Intel, we’re fighting for the country” .

In an era where semiconductors are the most important hardware in the world, Intel may be too important for the U.S. to let fail. Whether that results in further government intervention, private equity investments, or even a partial breakup, Intel’s survival has now become a matter of national interest.