FILE PHOTO: A smartphone with a displayed Intel logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) -The Trump administration is in talks to take a 10% stake in Intel by converting some or all of the struggling company's Chips Act grants into equity, Bloomberg News reported, citing a White House official and other people familiar with the matter.

Shares of Intel fell about 3% on Monday, after rallying last week on hopes of U.S. federal support. A 10% stake in the American chipmaker would be worth about $10 billion.

Intel has been slated to receive a combined $10.9 billion in Chips Act grants for commercial and military production, and the figure is roughly enough to pay for the government's holding, according to the Bloomberg report on Monday.

Intel declined to comment on the report, while the White House did not respond to a request for comment. Reuters could not immediately verify the report.

Media reports said last week that the U.S. government may buy a stake in Intel, after a meeting between CEO Lip-Bu Tan and President Donald Trump that was sparked by Trump's demand for the new Intel chief's resignation over his ties to Chinese firms.

Federal backing could give Intel more breathing room to revive its loss-making foundry business, analysts have said, but it still suffers from a weak product roadmap and challenges in attracting customers to its new factories.

"The fact that the U.S. government is stepping in to save a blue-chip American company likely means that Intel's competitive position was much worse than what anybody feared," said David Wagner, head of equity and portfolio manager at Intel shareholder Aptus Capital Advisors.

Wagner added that while he was skeptical about the U.S. government investing taxpayer money into U.S. companies, it was better than having Intel become a state-owned entity.

Aptus Capital Advisors holds 80,581 shares of Intel.

Trump, who said the meeting with Tan was "very interesting" one, has taken an unprecedented approach to corporate interventions.

He has pushed for multibillion-dollar government tie-ups in semiconductors and rare earths, such as a pay-for-play deal with Nvidia and an arrangement with rare earth producer MP Materials to secure critical minerals.

The U.S. government has previously taken equity stakes in companies under stress. During the 2007-2009 financial crisis, it took a stake in General Motors — later exiting the stake in 2013.

Intel last year secured nearly $8 billion in subsidies, the largest outlay under the act, to build new factories in Ohio and other states as former CEO Pat Gelsinger bet on them to restore the company's manufacturing edge.

Tan, however, pared back such ambitions, slowing construction in Ohio. He plans to build factories based on demand for the services, which analysts have said could put him at odds with Trump's push to shore up American manufacturing.

(Reporting by Zaheer Kachwala and Jaspreet Singh in Bengaluru; Editing by Arun Koyyur, Shinjini Ganguli and Alan Barona)