The U.S. government plans to scale back Intel Corp’s preliminary $8.5 billion chips grant to less than $8 billion, the New York Times reported, citing anonymous sources.

The reduction considers a $3 billion contract Intel received to produce chips for the Pentagon, the report said.

Earlier this year, the Biden administration announced nearly $20 billion in grants and loans to bolster Intel’s domestic semiconductor manufacturing, marking the government’s largest financial commitment to cutting-edge chip production. This included a preliminary agreement for $8.5 billion in grants and up to $11 billion in loans to support factory construction and modernization in Arizona.

The funding is part of the $52.7 billion CHIPS and Science Act, which aims to enhance domestic semiconductor production. The act allocates $39 billion for manufacturing subsidies and $11 billion for research and development.

Intel’s grant adjustments reflect broader efforts to balance public funding for chip production with private contracts as the U.S. aims to strengthen its semiconductor industry against global competition.