WASHINGTON, March 20 (Reuters) - The Biden

administration said it is awarding Intel ( INTC ) nearly $20

billion in grants and loans on Wednesday, supercharging the

company's domestic semiconductor chip output and marking the

government's largest outlay to subsidize leading-edge chip

production.

President Joe Biden will announce the preliminary agreement

for $8.5 billion in grants and up to $11 billion in loans for

Intel ( INTC ) in Arizona, where some of the funding to be used to build

two new factories and modernize an existing one.

Commerce Department Secretary Gina Raimondo called it a huge

deal and one of the largest investments ever in U.S.

semiconductor manufacturing.

"It means leading-edge semiconductors made in the United

States of America," she said on Tuesday, noting that the

administration hopes to increase the United States' share of

leading-edge chip production from 0% to 20% by 2030 through the

subsidy program.

The historic outlay shows the Biden administration is

betting big on Intel ( INTC ) as part of the 2022 CHIPS and Science Act,

a bid to boost domestic semiconductor output with $52.7 billion

in funding, including $39 billion in subsidies for semiconductor

production and $11 billion for research and development.

It could also help Biden, who lags rival former Republican

President Donald Trump in voter perceptions of the U.S. economy,

to again take Arizona in November's presidential election. The

Democrat narrowly won the Southwestern swing state in 2020.

The goal of the CHIPS Act is to reduce reliance on China

and Taiwan, as the share of global semiconductor manufacturing

capacity in the U.S. has fallen from 37% in 1990 to 12% in 2020,

according to the Semiconductor Industry Association.

Lawmakers have warned that U.S. dependence on chips

manufactured in Taiwan by the world's top contract chip

manufacturer TSMC is risky because China claims the island as

its territory and has reserved the right to use force to retake

it.

Last month, the Biden administration awarded $1.5 billion to

GlobalFoundries ( GFS ), the world's third-largest contract

chipmaker, to build a semiconductor production facility in

Malta, New York, and expand existing operations there and in

Burlington, Vermont.

In January, the Commerce Department announced Microchip

Technology ( MCHP ) would get $162 million in government grants,

allowing the company to triple production of mature-node

semiconductor chips and microcontroller units at two U.S.

factories.

Awards for South Korea's Samsung and Taiwan's TSMC are

expected in the coming weeks. The Commerce Department is

dedicating $28 billion for government subsidies for advanced

chips manufacturing - although it has more than $70 billion in

requests - and also has $75 billion in lending authority.

POINT OF PRIDE

Reuters first reported news of Biden's Arizona trip, which

could also help Democrats defend a critical U.S. Senate seat in

November and possibly provide a boost in a pair of competitive

House of Representatives races.

Arizona was a point of pride for Biden's 2020 campaign,

which flipped the state for the first time in six presidential

elections, but his aides see delivering a repeat victory as a

tall order.

BOON FOR INTEL

It is also welcome news for Intel ( INTC ), which in January forecast

first-quarter revenue could miss market estimates by more than

$2 billion, as it grapples with uncertain demand for its chips

used in the traditional server and personal computer markets.

In addition to Intel's ( INTC ) Arizona projects, the money will help

fund Intel's ( INTC ) delayed leading-edge factory construction project

in Ohio, a nearly complete advanced packaging facility in New

Mexico, and a research and development facility in Oregon.

Officials declined to detail how much money would flow to

each project.

In addition to the funds slated to be announced on

Wednesday, Intel ( INTC ) is expected to receive as much as $3.5 billion

from the Commerce Department to boost security at its Arizona

facilities to produce sensitive chips for the military.

"We're keeping our promise of bringing manufacturing back to

America and making the United States the leader in microchip

production once again," U.S. Senate Majority Leader Chuck

Schumer said in remarks on the Senate floor on Wednesday.