Comment by ch4s3
Comment by ch4s3 17 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.
Comment by ch4s3 17 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.
Here I thought the point of a grant/subsidy is that it allows companies to take risk - by setting up factories, funding research without worrying about the monetary cost etc.
Government benefits through one, generating employment - direct and indirect employment, raising taxes through personal taxes (indirectly impacting tax collection) or second the country being at the forefront of the innovation etc. That is how average tax payer was supposed to benefit.
But I guess trying to nationalize companies and "benefiting" from company profits was something people were missing. How did no one see that? Ah yes, third world countries try this routinely for "national security" and it always leads to moral hazard pointed out by the person above you.
> But I guess trying to nationalize companies and "benefiting" from company profits was something people were missing. How did no one see that? Ah yes, third world countries try this routinely for "national security" and it always leads to moral hazard pointed out by the person above you.
This isn't nationalizing it though, this is just an investment into it. Investments aren't bad.
Investments can be bad. The market efficiently destroys malallocated capital through competition.
The problem with government taking stakes in private companies is that it creates moral hazard. By taking ownership in Intel, the government has effectively "propped it up". This means that Intel competitors that made less risky decisions to remain solvent are now losing; their bet was Intel was operating poorly, and instead of capitalizing on Intel's downfall so they can fill the gap, the government has plugged the gap. This action distorts markets away from their competitive equilibrium. In the process it generates moral hazard and deadweight loss.
Investments by the government can make sense, but generally it makes the most sense when investments support public goods (arguably also when supporting goods/services that the private market would not). Cpus are neither.
Just like the SVB bailout, or Freddie/Fannie/Sallie establisments, this is bad.
How does the average taxpayer ever actually end up benefitting point blank?
Not that I agree with bail-outs, but 2008 financial crisis that resulted in a number of bail outs actually netted the treasury a profit.
> In total, U.S. government economic bailouts related to the 2008 financial crisis had federal outflows (expenditures, loans, and investments) of $633.6 billion and inflows (funds returned to the Treasury as interest, dividends, fees, or stock warrant repurchases) of $754.8 billion, for a net profit of $121 billion
Was that profit diverted from companies that were better managed and didn't get a bailout? We can see who won. Who lost? And why is the government deciding winners and losers? Why especially when the government is one of those winners?
To be clear, that bailout was passed by the Congress. This is a new phase of the President gets to just bail out anyone.
Profits from the stake lower taxes that would otherwise be levied on you? Of course that’s moot if the deficit isn’t something being taken seriously.
Deficits aren't real and 10% of $0 when they likely go bankrupt is $0
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.
I see two objections to this: The collateral damage to the surrounding economy (well ran companies might be dependent on Intel) and the loss of strategically important institutions and knowledge, especially in markets with a high barrier to entry. So I think bailing out can be justified, even if it is a clear moral hazard. The better solution I think is to prevent markets from becoming too oligopolistic and firms from becoming too big to fail. But this would require a government who isn't afraid of taking anti-trust measures to maintain market competition, but the US has been moving away from that model for decades.
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.
> 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.
Apple & Nvidia switching to, say, Samsung as their foundry would likely take at least a year before they'd start to see production. Meanwhile, little to no revenue. It is a risk for them. And if China went for Taiwan, why not also cause some trouble for S Korea while they're at it? (Wouldn't have to invade, just block shipping, etc. - if China decided to do maximal damage. It's also quite possible that N Korea would take advantage of the situation)
I think it would be shorter, they work with Samsung to evaluate their option. And if China did went after TSMC (Taiwan and us) plus Samsung, Nvidia can still switch supplier (Intel?). The risk (let's say one year revenu) isn't worth joining the fab business. They have seen what happened to Intel and AND. And they know China will have good fabs in not too long. Nvidia true competitor is apple, and they are in the same boat.
You’re proposing that the United States government force Apple to invest in Intel? Apple chose a different supplier than Intel; at this point it’s hard to consider Intel a competitor to TSMC but let’s pretend they are.
You have proposed a “free market” system in which if you choose the wrong competitor you can be forced to bail out the chosen one. The economics of that don’t work at all.
I'd rather the citizens control the companies than the other way around.
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.
You can't build a new Intel. That would take decades. These aren't startups. They are massive fucking machines that can't just be disassembled and put back together by someone else. So the idea is to control them and get them back on track to better serve the collective interest.
You do that by letting them fail.
You let them fail because that ensures that everyone else in the economy fixes their shit and stays competitive. America developed more world class successes, by getting out of the way and letting badly run firms fail.
Especially since NVIDIA is a competitor.
You can't build a new one so you keep the old one on life support? This makes no sense. The old Intel is not the right choice. How many decades do you think it will take them to recover if you don't clean house? How many decades has it already been? The later you start the longer you remain vulnerable to foreign competition.
You wouldn’t have to build a new intel. Their IP, infrastructure, and even the individual talent pool won’t simply disappear. They can either get redistributed into more competent companies like their competitors or restructured into a new venture. The only losers would be the current shareholders.
> or restructured into a new venture
Isn’t that exactly what the “too big to fail” bailouts were, in practice?
As a non-American, a big part of the appeal of American companies was their independence from the American government.
Was.
> 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.
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.
> We can definitely offer subsidies for manufacturing in the US
The very subsidies Intel now has to pay with shares for? How is that a subsidy? Companies now and in the future would be very concerned before taking any US subsidies because the terms can always change after the fact.
And it’s still owned by a foreign country and Taiwan is restricting TSMC from manufacturing their most advanced processors from being manufactured in the US.
https://www.tomshardware.com/tech-industry/semiconductors/ta...
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.
No amount of money is going to create a new fab in a reasonable timeframe.
You can buy one, if a suitable one exists, but there isn’t spare stock sitting around; the lead time is long, especially for high end nodes.
If Taiwan becomes practically inaccessible, is there any way another country can setup a competing fab (for the latest generation of chip sizes) without years of R&D? As far as I understand, the practical knowledge of how to do it doesn't exist right now. (Neither does the prerequisite tooling)
Given there’s fabs doing essentially the same thing elsewhere then yes. Getting down to 3nm and the technology and secrets that involves would take a while though.
TSMC can’t do it either without xUV lithography machines made by ASML in the Netherlands.
Furthermore there isn’t anything magical about about the current generation of chips that couldn’t be replicated at at a scale of 12 or 15 or 20 nanometers - it’s just that scaling down to that small allows for a greater density of transistors per wafer and thus increased power efficiency. An AI supercomputer could be built with chips with bigger transistors than 3nm it would just run hotter.
And investing in intel aside, one of Nvidias great competitive moats is CUDA and that’s software not hardware.
Aren’t the actual machines used in the fabs still made in Germany?
GPUs would go backwards a few generations for 5-10 years. Also supply shock on other industries would double the prices of chips for vehicles. Eg covid 3.0
"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.
I’d love this to be true but the tech involved is Sci-fi level stuff. Neutron beams used to chop off atomically perfect slices of giant silicon crystals and wacky stuff like that.
TBF garage fabs -are- a thing but it’s in the hundreds of nanometers scale. Thin film technology is also promising for low tech tape outs, but neither of those is going to be practical for anything better than 1980/90s tech. A modern die would be in the square meters range on those process densities, and could never achieve ghz speeds.
That said, there are a ton of scrappy companies sending out designs to 30-100nm scale fabs, companies with 5-10 employees cranking out cool designs and custom silicon… but they are still sending their tape-outs to giant companies to fab, just on their old, obsolete machines.
Silicon foundries are incredibly capital intensive, and short SOTA process lifespans burn through that investment at a frantic pace.
Sadly no. There isn't really a single person who understands the entire SOTA chip fabrication process in enough detail. Think thousands of material science PhDs with master and apprentice style relationships inserted at every level of a massive tech tree.
It's not like you can just look at the plans for a chip fab and copy/paste it into a new location and hire people to fill in who will have any idea how to work it.
I think one of the people who got closest to that was Sam Zeloof.
He kind of had everything going: extremely clever and motivated, cooperation with his parents (who also worked in the industry), access to equipment. Kind of hard to improve on that.
He was able to replicate most of Intel's SOTA process... from 50 years ago. That's more than almost everyone else has managed in their garage but that's about the best you can expect without insane capex and ramp up (and again, it's not like he didn't have access to capital, it just wasn't monetary.) Even still it took five or so years to work everything out.
The SOTA today is really kind of insane. It's right at the frontier of what all of humanity is capable of. Of course as time goes on we'll push that out and today's SOTA is tomorrow's commodity but that won't change everyone's concern with being unable to replicate the contemporary best process.
The reality is all our "defense" needs (and arguably most other needs too) are far more than adequately met with processes a decade old now. It's really not the big deal everyone makes it out to be.
> The reality is all our "defense" needs (and arguably most other needs too) are far more than adequately met with processes a decade old now. It's really not the big deal everyone makes it out to be.
Right, this is why I think in-sourcing chip manufacture is totally viable (that is, if we were actually interested in that and not just using it as an excuse for corruption). The interesting exceptions I've heard about are things like, IIRC, high-power local AI for autonomous drones. But for SAMs and such, old tech will probably do it.
It is not a straw man.
There is no amount of scrappy cleverness that gets you from zero to manufacturing cutting-edge chips without shitloads of capital investment, years/decades of R&D, a huge manufacturing workforce, and big contracts.
There's no such thing as starting small and scaling in that business.
There is no such thing as a “smallish” chip manufacturer that can manufacture leading edge chips. It’s about scale.
If it were that easy, Apple, Amazon, Google AMD, Nvidia, etc who all design their own chips would have done it.
Intel couldn’t because the science is too hard to do with the scale of only your own designs. Intel had to stop competing with their own designs and open up their fabs like tsmc.
Flip side: why would Apple, Amazon, Google, AMD, NVIDIA etc build their own when they can outsource it cheaper?
Companies are run to make a profit… they don’t care about sovereignty as long as the money is coming in.
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.
While that argument makes sense from a purely philosophical perspective, it doesn’t hold water in the reality of this situation.
Nobody is entering the chip making business and growing to a size and scale to compete with Intel in 2025. If they collapse tomorrow there aren’t going to be startups filling in the gaps, there’s just going to be massive shortages of chips and chaos.