U.S. government takes 10% stake in Intel
(cnbc.com)521 points by givemeethekeys 11 hours ago
521 points by givemeethekeys 11 hours ago
I’d really rather we didn’t bail out these companies at all. It clearly creates moral hazard and makes it hard for better run companies to enter markets.
If shareholders are losing ownership it's less a pure bailout and more a strategic investment and/or takeover. It also potentially lets the average taxpayer benefit rather than just those its directly propping up.
How does the average taxpayer ever actually end up benefitting point blank?
They aren't really losing ownership, they sold ownership at market rate.
This has worked REALLY well in countries like India. Where it resulted in the ability to be badly run, AND be excluded from market pressure. Which resulted in corruption and a drag on the economy.
There are governments which can take a stake and be ok, and then there are governments which are setting up to set money on fire.
Well as much as you don't like it, companies this big failing is terrible for the economy and in this case, national security to a degree. I'm of the thinking that when your company gets to a certain size we'd be well off nationalizing. Apple has more money than some nation states. Something that huge has the potential to affect global politics. There's lots of other reasons too, but this isn't like letting the corner store fail. The repercussions are huge. If we're going to bail out, the people should own some of it.
When a company “fails” it does not disappear in a puff of smoke. It goes into bankruptcy and is sold in parts. Some of those parts are perfectly functioning divisions which will continue to function but they will be owned by someone else.
I would rather have Intel go bankrupt, sell profitable pieces to private buyers, and if there are any pieces that are not profitable but crucial to national interests, create a company out of them and have the government buy them. This way you are not propping up a dysfunctional behemoth.
Things must die in order for new better things to take their place. This applies to companies as well.
> I'm of the thinking that when your company gets to a certain size we'd be well off nationalizing.
The public sector is great at two things: (1) getting literally millions of people to show up to work and do well-defined jobs (i.e. nothing outside the lines) that do not change from year to year, and (2) dumping billions into research, with very little of (2) affecting (1). Critically, the public sector has extraordinary difficulty with the agility needed for iterative product development.
If companies get to a certain size and their day-to-day operations are more-or-less fundamentally the same year-after-year, yeah there's an argument for nationalizing them. You see this in arguments to nationalize segments from oil refineries, apartment construction, and airlines. There's something coarse about caretaker CEOs and private shareholders getting rich, instead of the public purse, off the economic rents thrown off from a mature machine that doesn't have much more, if any, room for growth. But the key question is whether the potential for growth has been fully exploited or not; if it hasn't been, then the government certainly won't succeed at exploiting additional growth, and it's better for the company to stay in private hands, which will be motivated to privatize the wealth from achieving that growth, and the government will be paid more in taxes if they succeed.
That's why I'm not convinced chip manufacturing is there when there is still yearly research into reducing process sizes. Maybe there's a case for nationalizing the foundry lines producing older, larger processes that are used in current weapons designs, but that's not the case for nationalizing the whole company.
> Apple has more money than some nation states.
And Apple needs their chips fabbed, so why not have Apple invest $50B into Intel? Nvidia could afford to chip in too. These companies that face a huge amount of geopolitical risk because they've put all of their eggs in the TSMC basket should have to pay for this not US taxpayers.
How is using tax money to prop up uncompetitive companies good for national security? Wouldn't it be better to replace them with competitive companies? It's super hard to be successful when your own government in backing the competition.
As a non-American, a big part of the appeal of American companies was their independence from the American government.
Was.
Chip manufacturing is too important for the US. We can’t be completely dependent on Taiwan. Nothing against Taiwan, it’s one attack away from being obliterated by China.
No company is going to come out of someone’s garage and build a chip fab.
Nobody is going to swoop in and buy a distressed company that owns a bunch of fabs then turn it around if that company keeps getting bailed out.
Right it would make a lot more sense to let this happen and then restrict that the buyers be American (or European, I guess).
Nvidia has a market cap of 4.5 trillion dollars and everyone is committing hundreds of billions to AI CapEx in their direction - they can afford to organise chip fabs if it really came to it. Ok TSMC and ASML would need to be on board but it could be done. Should be done in fact because even a simple SWOT analysis would show the risk to their business.
"Someone's garage" is a straw man. There must be people here who could, with adequate funding, build a smallish but viable chip manufacturing company.
Why is this so hard for people to understand? Intel for years had a massive lead in the market. Instead of investing in the business the clevel suite instead opted for idiotic stock buybacks.
The only good news is that C-level suite can continue to do the same shit over and over again.
Government shouldn't bail out anyone. Period. It should enact preferential policies like grants, tax cuts, subsidies etc. for industries they want to promote. It is done all the time. That is what happened with the CHIPS Act.
The moment 10% stake was announced this became political. While the stated reason might be national security etc, in reality something else might be at play.
One, this government and its supporters have been talking about government "wasteful" spending. So, a stake shows that they got something in return for that public money. The money is now "well spent".
Second, it helps boost the political "dealmaker" image of POTUS and we all know how much he cares about his image.
The government took 79.9% of AIG in that bailout - which was the biggest of the "too big to fail" bailouts from the past. People seem to forget that the owners of these companies that were bailed out got almost completely wiped out and instead focus on management compensation (which famously stayed high).
One challenge with the government taking large ownership in private companies is that it creates an opportunity to offload the ownership later, and that offloading might happen during a different presidential administration from the one that acquired it, and the offloading process can also be an opportunity to enrich someone else.
One example that comes to mind is the current Fannie Freddie Mac.
That's an over simplification. AIG was bailed out. And it's investors were wiped out. But AIG owed a huge amount of money to banks and investment firms that had enormous benefit from the bail out. Those are the people who paid no price.
If a company has truly become too big to fail that it makes sense for the federal government to bail them out, then why are we even leaving the welfare of the company up to private industry in the first place? It's just asking for ways to siphon taxpayer money out of the government through their willingness to buy shares. It inflates the stock price because it shows that the government might buy more share in the future at market rate. Its operations should be required to be more transparency, since if they're large enough that their failure would dramatically impact the welfare of the whole country, their operations should be subject to more direct democratic will (at least, more direct than the many steps removed from what is happening to Intel).
Intel is public and their financials have indicated this would happen. Even at my most irrationally exuberant their stock buybacks didn’t make much sense.
I’m not sure what “more transparency would look like to you, but publicly traded companies with audited financials are quite transparent. As for the part about siphoning money, history has shown that taxpayers do well. In 2008, the US government took roughly 80% of AIG, sold off their stock by 2012, made a roughly $15 billion profit and AIG is no longer considered too big to fail. It worked and did what it was intended to do. There are reasons to be positive about this.
Don't forget that the US government took roughly 80% of AIG in a move that was later declared illegal and made a roughly $15 billion profit.
> in a move that was later declared illegal
To be fair, a lower court ruled it “illegal exaction” but awarded $0 in damages as the illegal exaction prevented bankruptcy which would have zeroed out the investment anyways. Then the Federal Court of Appeals tossed that ruling as the plaintiffs did not have standing to pursue action.
There is no current ruling that the acquisition was illegal.
The municipalities could negotiate for those rights when they agree to pay for the stadium. It's on them if they risk it.
I think it would've been much better to incentivize the likes of Apple and Nvidia to make investments in Intel. They need to have their designs fabbed, they have a good amount of geopolitical risk. They also have a lot of money on hand. Didn't Apple say they were going to invest $600B into the US? (not that that's really going to happen), ok, so why not put $50B into Intel?
> On the other hand, I wish it were a more formalized process
It must at least involve Congress!
What's happening here is crazy: It's the same as if Congress authorized $X for a city bridge and Trump comes in and holds up the funds demanding a cut/kickback of the tolls.
The Constitution does not give the Executive the power to arbitrarily modify what Congress has authorized, converting between grants versus loans versus stock-purchases versus plain extortion.
The heavily criticized auto bailout was precisely this way and actually turned a profit once the government sold its stake. This is different and I can’t imagine the government will ever sell its stake.
Did it turn a real profit or a nominal profit, I wonder? I remember hearing a brrrr sound around that time.
I was wrong. The $80B TARP program lost quite a bit of money on GM. The program overall lost $9B while saving millions of jobs and stabilizing the economy.
But it still took a share in companies that participated in TARP which is why some payed back the loan instead of letting it convert into ownership shares if I recall correctly.
Government is starting to be to big to fail. Living in the Great Lakes region its just the reality of it, as the geopolitics of the region are outplayed by idiots in other parts of the state.
They're converting a grant, so Intel is worse off due to this move.
The only real benefit I can see is it looks more revenue neutral because the government getting something of value and Trump is unpopular for spending so much money on unfunded tax cuts.
It is going to help ensure that Intel doesn’t just waste the $8.9B they are getting
I think I agree overall, but "these kind of deals should be boring, not a media event" make me doubt that position, because "deal becomes a media event" seems so eventually-inevitable given how democracy works.
The “our president made a deal!” part of it makes me skeptical of actual long term patterns past a Trump administration.
While not walked back completely, a lot of what Trump does is minimized and scaled back after the initial theatrical moment. Still in a bad place, but usually some TACO moment happens.
And then, in the end, it’s some executive action that lasts as long as the current president is in power.
Right because capitalism rules and socialism is for fools! Just kidding, but can we please let the phrase "free market" die?
The government is not 'bailing' Intel out. Intel's CPU business is profitable. Their manufacturing is not. America gave intel grants to build better manufacturing to secure America's national security interests. Congress did not authorize any acquisition of Intel shares.
All the talk about this from a business / investment side leaves out the simple fact that this is not actually authorized by anyone with the power to actually do such a thing.
Essentially, the government, elected by the public, voted to offer grants to intel, and then intel shareholders woke up today to find their equity had been diluted.
In the end, it turns out that people didn't dislike Chinese policies of nationalized industries. They only disliked that the Chinese were doing it.
I can't wait for the "I don't think social credit scores are a bad idea. Cancel culture is good actually".
"People" you are referring to want a level playing field. If the Chinese government is tilting the field, there aren't a lot of good options. You can either watch the Chinese subsidize draining most productive capacity from the rest of the world, erect trade barriers (my preference, but it would require cooperation with other countries, which... ain't gonna happen for a while now), or try to tilt back.
If you truly think Chinese subsidies are artificially depressing prices, then just buy Chinese goods to take Chinese’s people’s hard earned money.
Are you unfamiliar with the concept of cornering a market? Sure, uber was offering lower prices subsidized by VCs until taxis were driven off. After the fact they raised prices back up. Or what Amazon did with diapers.com? It is not wise to let your geopolitical foe gut the productive capability of your economy. It’s how America took over dominance from the UK by taking over the high tech business of the day back then (textiles).
It’s fine for the consumer in the short term but a flawed long term strategy.
Yeah sure but then you do it properly. Why did Trump have to coerce them into the deal (by threatening to fire the CEO)? Just imagine what's going on behind closed doors.
That makes sense. I think the thing that would make capitalism better is if the government did more to own the means of production.
What bothers me is the double standard.
When the public asks for fully publicly-owned railways, universal healthcare, or any basic social safety assurances—“socialism”.
When a megacorporation struggles, immediately to the rescue.
Bailouts aren't following some rules of fairness, they're for specific reasons like preventing greater economic problems (2008) or national security (probably Intel). You might disagree that those are the best ways to address those risks but that's why we elect the government to make those decisions and act on them instead of letting the country collapse - which is arguably more important than social services which won't really matter if there's no money to fund them or the country has been taken over by some hostile enemy.
Is like the country is not already collapsing due to lack of social services compared to the supposed enemy which already has higher lifespan while having 10x lower gdp per capita.
> Bailouts aren't following some rules of fairness
And people wonder why populism came back. Huge transfers of wealth aren't about 'fairness', its about preventing greater economic problems that the people who received the bailout say will happen if they don't get bailed out.
At the end of the day, this line of thought is going to fuck over the country far more than any depression would.
That’s fine. But when the gov is picking winners and losers, that not a free market. What it is, it is. But it’s not a free market based system.
One big difference is management control. People feel that government administered services tend to have poor management and citizen services more often than not. One big example is the DMV since almost every has experience dealing with it, long queue times are almost universal because no one gives a crap and it's very hard to fire a government employee. Or the passport issuance, or applying for permits. Or unemployment benefits, the list goes on and on.
Imagine if the DMV and passport services had even the possibility of competition like a private company has. You bet all of a sudden the service would get much faster and better and with fewer mistakes and red tape with the same or fewer number of employees. Or someone would set up a competitor and imagine how many people would even pay extra just to not waste several hours of their time.
It's tax payer money so there is a lot more waste than even at big private companies. For example, the costs to just administer and operate the social security administration(not including any money paid out to recipients) is $15 billion dollars with a big B. There is no incentive for anyone to save the tax payer any money and there would be a huge pushback from govt contractors, unions and employeees. See how much hate DOGE gets for even proposing cuts or higher efficiencies.
Any large IT project in the government in almost any country and at any goverment costs huge amounts while not returning much value if any. Look at the state and costs of local metro stations and trains in almost any city.
That's interesting example to choose, as I've actually heard often that the Social Security administration is an example of an efficient government administration.
For example, a quick Google search shows administrative overhead as around 0.5% of benefits: https://www.cbpp.org/research/social-security/top-ten-facts-...
Just one instance.
https://fedscoop.com/problem-project-threatens-progress-soci...
> The program, called the Disability Case Processing System, or DCPS, was designed to improve case processing and enhance customer service. But six years and $288 million later the program has “delivered limited functionality and faced schedule delays as well as increasing stakeholder concerns
For the main system they're still using COBOL, which has no Date data type, causing issues even in 2025.
> See how much hate DOGE gets for even proposing cuts or higher efficiencies.
I don't think many people believed DOGE was ever intended to improve government efficiency in any real sense.
Well, my local DMV is much more efficient and friendly than the private health insurance company I have to deal with.
But part of that is lack of competition. I can't really switch to a different insurance company, because the one I am with is heavily subsidized by my employer.
And BTW, I agree that Social Security overhead is unacceptable. It should be privatized and increased to at least $500 billion to be comparable with health insurance companies.
It's not acceptable at all to make private companies look bad.
I agree. In fact, I think the government should own all utilities like they do in more socialist countries. It gets rid of price gouging, and the stabilizes the market in things that are necessary for human life.
The natural resources of the country should belong to all of us. Not just a select few.
On a related story. Tesla was saved by a $500 million bailout loan from the DEO loan office. Part of the agreement was that the US government would take a stake in Tesla UNLESS they pay back the loan ahead of schedule. That's why Tesla paid it back ahead of schedule, Elon didn't want the government to take a stake. But he spun it as a victory for the US tax payer.
EDIT: Before downvoting, tell me where I'm wrong.
You're wrong because it wasn't some bailout it was a normal government loan available to to a wide range of companies. I'm not Tesla stan but it's massively misrepresenting the loan to call it a bailout. It's the kind of market investing the government should be doing, underwriting somewhat riskier loans to push the envelope on technology.
https://www.energy.gov/lpo/advanced-technology-vehicles-manu...
Genuine question-
How does Govt picking winners and losers going to help?
Intel is no Too big to fail Bank. Why save Intel of all chip manufacturers? Wouldnt it be like 25 years too late, with Intel and its heydays !?
Would Govt now ensure parity by investing in "marquee" entities across different industrial domains?
There is only 1 winner and 1 loser: Intel.
It's the only chip manufacturer "left" in the US. The argument is national security: the US expects China to invade Taiwan and this will kill TSMC in the process.
Whether this will happen or not can be debated, but this is what the government expects.
> It's the only chip manufacturer "left" in the US
Global Foundries, Micron, and Texas Instruments all come to mind
GF hasn't gone past the 12nm node. TI is at 45nm. Micron is on relatively recent processes, but they make RAM, not logic (which are totally different processes). Intel is the only chip manufacturer left that is working in logic at anything like the leading edge.
GF is a zombie company. Micron and TI are both far far away from leading edge. There is only one American company which is both developing and manufacturing leading edge nodes.
re: Micron - Memory is very different from logic chips. You vast number of repeating cells in memory. If any of them are bad you can just turn them off and bin them as lower capacity. You can do that to some extend with logic chips but not nearly as much as memory.
> the US expects China to invade Taiwan and this will kill TSMC in the process.
Would it though? The TSMC foundries are pretty much in every continent. Are they just going to stop operating if this happens? Because that seems akin to killing a golden goose.
Also what is up with Global Foundries? I don’t hear a peep about them.
I believe the most modern TSMC fabs outside of Taiwan are in Arizona. They are just moving to 4nm which is nearly 5 years old and just a revision of 5nm which is getting close to 7 years old.
TSMC aims to have N3 in Arizona by 2028 at the earliest which is 6 years after it first released. By that time, TSMC will have released N3X, N2, N2P, N2X, A16, and A14.
TSMC is heavily sponsored by the Taiwanese government and was created with the express purpose of making Taiwan so valuable that the West would be forced to defend them against China. Moving newer processes out of the country is against their national interests and they've made it clear that there's no plan to do that.
Outside of Taiwan TSMC foundries are just pumping out already developed non leading edge fab processes. Everyone who matters to TSMC tech development is in Taiwan.
This is my thought on it too. I don't think this is meant to be a political win so much as US intelligence views chip manufacturing extremely strategically. I also don't know about what will happen to TSMC. But the US has been pushing for US made GPUs as well. This goes back to Biden's admin as well.
https://www.tomshardware.com/tech-industry/us-govt-pushes-nv...
And the current administration is unlikely to help Taiwan in the event of said invasion.
If the argument was for protecting Intel, then the US government should be placing huge orders with Intel for solutions that will fund R&D and allow the company to regain its position as a foundry. They should be tapping into the defense budget. DARPA should be involved. This was an opportunity for petty extortion and a step towards socialism.
Huge order for... what? DoD's needs for chips are quite modest in quantity. Truth is that the US Gov doesn't need the volume which requires Intel to keep afloat.
Government involvement is the fastest way to corrupt the purpose of an organization, hollow out its soul and quickly get rid of all the competant people. There's a reason that the DOGE findings made a laughing stock of government employees.
As far as I know none of them manufacture anything resembling a replacement for a Xeon, which is relevant to national security because those are uses in military applications.
I'm surprised to see on https://en.wikipedia.org/wiki/Microchip_Technology that Microchip does in fact have fabs. I thought it was fabless! Its fabs are in the US, but the assembly and test facilities are all across the Pacific.
I see it different. The loser is the taxpayers. The loser is the market, which is less and less free. When there’s no incentive to run your company correctly… we get another company not run correctly.
And now China knows the US expects this and it also knows the US does not expect to stop China, so China knows that it can expect the US to do very little. It's game theory turtles all the way down...
Edit: I think it's a misconception that China cares much about fabs in Taiwan. It wants unification.
The only charitable answer I could give is national security reasons for having domestic chip production, and even that could be accomplished in ways that don’t require the federal government having an ownership stake in Intel. For example, I don’t think the federal government has ownership stakes in Lockheed Martin and Northrop Grumman, despite those companies’ dependence on the military.
I don't expect a good reason given the history of this Administration, but a reason in my mind to save Intel is there's only 3 license holders for x86 CPUs. Intel, AMD (American), and VIA (Taiwanese). A dead Intel leaves a single American company that is able to make x86 processors, and a monopoly for actually good x86 CPUs. But somehow I suspect there's no logical reason for this besides lining the pockets of those in the Administration.
Why would the ISA matter to the government? I could see this being about Intel's physical manufacturing capabilities, but the ISA should be pretty irrelevant. Recompile what code you can, run the rest via qemu-user-static.
I hope this is not the reason. I think x86 is a deadend technology. ARM's energy superiority makes it a better choice. x86 only still being used due to legacy/backwards compatibility but thats changing. Apple moved completely away from x86. Theres more and more ARM based windows computers being sold. Theres no x86 chips in phones.
A dead Intel could open the door to have more then three license holders. Isn't Intel the reason there are only three license holders?
I haven't heard of them until this comment, but reading through Wikipedia, and a techpowerup article, I'm not seeing that they actually own a license to manufacture x86 cpus freely. It seems like they were able to due to it being a partnership with AMD. I could easily be wrong though.
From my vague understanding I thought that Hygon is able to build atop Zen 1 IP that AMD gave Hygon, although they can't get anything newer because of restrictions on doing business with China.
Hygon still seems to be making x86 CPUs: https://www.techpowerup.com/336529/hygon-prepares-128-core-5....
While there are other good reasons to save Intel, if it went under, someone could still buy the license. I can’t imagine why anyone would want a license to x86 in 2025. It’s not like all of the companies designing custom chips are going to be falling over themselves to design use the x86 ISA.
You are asking why save Intel of all chip manufacturers, and the answer is because there aren't any other major chip manufacturers in the US.
AMD no longer has a fab. TSMC dominates the global market and basically has no competition.
In the event that Taiwan is invaded, the US would suddenly have a huge problem getting access to any kind of high end chips, be they CPUs or GPUs. This would be a major problem economically and militarily for the US.
Some caveats: Due to the chip act, TSMC does now have fabs Arizona, though I'm not sure what their capacity is. TI, and some others building lower end components also have fabs I believe. For x86, high end ARM, and GPU's, virtually all of that is manufactured by TSMC right now, mostly in Taiwan.
> TSMC does now have fabs Arizona, though I'm not sure what their capacity is.
180,000 wafers a year. Globally they do 17 million. They announced first profit yesterday.
They are the only US company that can produce cutting edge chips now and realistically within the next 15+ years. It doesn’t matter that TSMC produces chips in the US. That is nice for the short term but doesn’t do much for the US in the long term if TSMC falls under China’s influence.
Intel is in the midst of a dramatic turnaround and huge shift in strategy. It might fail. But if they succeed it puts Intel and the US in a much stronger position in terms of technology and military leadership.
It mattered for China to have Apple/Foxconn/etc assemble phones in China. By this same logic, won’t TSMC have more tacit knowledge to offer America than Intel, even if their independence is short-lived?
Why would TSMC or Taiwan want to give that information to the United States? There is a strategic reason why TSMC does not build their latest nodes and processes in the United States and why their R&D happens in Taiwan. They want / need The United States to protect Taiwan and their interests. It opens up strategic options for the United States if Intel or another US based company can produce cutting edge chips in the ballpark of TSMC.
This is a sure giveaway that the US military depends on Intel. It is the only major chip producer that has fabs in the US, and it is also the creator of the x86 architecture. That would mean that without Intel the military would become dependent on chips from Chinese Taiwan.
Not just the military, but the majority of consumer devices as well.
With Intel maintained, if China invades Taiwan and takes TSMC the US will still be able to make usable processors. They won't be the latest and greatest like TSMC, but they will be good enough. Maybe not the most powerful or efficient, but still rather close.
My only worry is this will mean management will start resting on their laurels and things will just continue to deteriorate. Or maybe the government can convince them to get rid of the bad management and start thinking more long term and less about immediate profits.
>This is a sure giveaway that the US military depends on Intel.
"Giveaway?" This isn't some secret, everyone knows the military depends on x86 processors, and having a company that can produce them domestically is a national security concern.
All I can think here is the government forcing back doors
(like the failed Clipper chip) https://en.m.wikipedia.org/wiki/Clipper_chip
The thinking might be the government needs a local industry for security. Think submarine manufacturing. Not a huge private market for that, but best to keep local so the supply can’t be cut off.
Though usually the government isn’t the best stewards of companies. When I worked for a large government contractor someone joked “yesterday’s technology tomorrow”. Some of that is for reliability, but it wasn’t cutting edge in a lot of ways.
This isn't a generalizable problem. There just aren't many companies that would be in a comparable situation to Intel.
Intel is:
* Critical to national security
* An advanced, industry that's extremely hard to spin up
* Essentially, one of two companies in it's industry.
Very few other companies meet all of those criteria.
What beats Boeing or Apple then so as to put Intel over the top of these guys?
They supply components for the defense industry, where foreign production isn't a viable option. No one bank is more important than that. This is also why Micron is getting a free fab for strategic redundancy despite no clear reason why they would need 2x capacity after onshoring back to Boise.
Free market capitalism is great until you’re about to be the big Loser. And then the big dog steps in and yells for time out.
I think if this was a domestic thing it would be all kinds of dumb and wrong. But as a US National Security thing, it makes sense if you’re of the mind that significant intervention is fine when it’s in your country’s best interest.
The next phase is watching the U.S. government keep Intel on a palliative drip of softball contracts and tax dollars. I guess there’s a fair argument that this form of bail out could help Intel thrive again… or at least secure a domestic supply of chips for natsec reasons?
I take that back. It's the old one you bribe on the side, this one you can bribe in the open.
(disclosure Intel Shareholder) I don't think they are one year behind. I think it is more than one year and for a long time they have not been closing in.
> How does Govt picking winners and losers going to help?
By ensuring that the US retains at least the ability to manufacture second tier CPUs vs complete reliance on Asia? This doesn't seem unreasonable.
The US can't employ poverty-tier labor to enable competitive margins, though. American businesses and global trade partners already largely reject Intel's foundry services.
Labor is not the key factor driving chip prices or performance. Fabs are highly automated and filled with extremely precise machinery. The maintenance and upkeep of machinery, the yield per wafer, and consumer demand drive the prices. Labor is basically a rounding error.
Doesn't matter. All of the US's advanced weaponry systems now use "state of the art" electronic systems, which in the context of defense only means "not decades out of date." Two or three generations old is perfectly fine. The military does not need the latest and greatest CPUs and GPUs going into the iPhone 17 or whatever, but it does need the equivalent of the chip in the iPhone 12 or iPhone 8 or whatever for integration into next generation weapons systems.
But if all of our advanced weaponry used chips from Taiwan or Korea, for example, then the strategic implications for war in East Asia would be radically different. People are right to say that China could engage in war over Taiwan for chips, but for the wrong reasons. It's not that they want access to the fabs (they'd love it, but they're not stupid and they know the fabs and know-how would be destroyed in the war), but it would deny the US defense industry access to those fabs.
If US missiles or drones use chips from TSMC, and TSMC is in occupied territory or a war zone... the US can't make more missiles or drones. And no matter how powerful your starting position is, you can't wage war without the ability to replenish your stockpiles. It's the bitter lesson Germany learned in both world wars.
China wants hegemony in Asia, and to remove the influence of the US, Japan, and their allies within what they perceive as their exclusive sphere of influence. How to achieve that? Invade Taiwan, which eliminates western access to TSMC one way or another, effectively blockading western defense industry from the core things they need to resupply their militaries in a war. Like WW1 all over again, a "preemptive war" becomes the game-theoretic optimal outcome, and the world suffers.
How to counter that? The US and its allies need to make sure they have access to chip fabrication facilities that can produce near-state-of-the-art chips, even at inflated prices that are not commercially viable in peacetime, as well as the necessary strategic minerals like germanium and lithium. Only then does calculus swing the other way in favor of peace. Hence Biden's effort to get TSMC to build SOTA fabs in Arizona, and when that failed/stumbled, this investment in Intel.
Haven’t you read Curtis Yarvin’s vision for America? Our leaders, VCs, and owners have
This feels like another signal that the U.S. as an economic superpower is transitioning into something else.
I guess this is kind of like an auto or bank bailout, but is there something to bail out, or are they just gaining ownership of a doomed (in the classical sense) corporation?
> the government made an $8.9 billion investment in Intel common stock, purchasing 433.3 million shares at a price of $20.47 per share, giving it a 10% stake in the company
> Of the total, $5.7 billion of the government funds will come from grants under the CHIPS Act that had been awarded but not paid, and $3.2 billion will come from separate government awards under a program to make secure chips
Interesting accounting there. I guess the government was threatening to void the grants or something? Why would Intel donate shares for grants already approved?
I guess this nets out to a stock issuance with no downward price pressure, so still not a bad trade for Intel if they thought those grants were worth nothing.
Because this clears the way to sell Intel Foundry and separate the chip design from the chip-manufacturing businesses completely.
The CHiPs act money had claw-backs such that if Intel sold the Foundry off they had to pay the government all the money back. This new deal waives all the clawbacks and says instead the Government gets warrants, good for five years, for 5% of the company at $20/share, good once they control less than 51% of the Foundry.
Ergo, the reason for the deal is that the board wants to sell off the Foundry, and didn't want to pay back the CHiPS act money.
In general I would rather the government take a stake in corporations they're bailing out. I think the "too big to fail" bailouts in the past should have come with more of a cost for the business, so on one hand I'm glad this is finally happening.
On the other hand, I wish it were a more formalized process rather than this politicized "our president made a deal to save america!" / "Intel is back and the government is investing BUY INTEL SHARES" media event. These things should follow a strict set of rules and processes so investors and companies know what to expect. These kind of deals should be boring, not a media event.