IMHO Let Intel fail. Their fabs can be bought in bankruptcy by other chip companies that may be better run. Granted, a lot of those companies are currently fabless, but how many would change that with equipment bought at a fraction of the cost? TI, Micron, GF all have fabs. Qualcomm strikes me as a fabless that might give it a shot. I'm assuming the people and know-how would come with the fabs of course.
Didn't we already cross this particular Rubicon during the auto bailout a decade ago?
Other examples:
> Since the 1950s, the federal government has stepped in as a backstop for railroads, farm credit, airlines (twice), automotive companies, savings and loan companies, banks, and farmers.
Every situation has its own idiosyncrasies, but in each, the federal government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have left the average taxpayer much worse off. In some instances, the treasury guaranteed loans, meaning that creditors would not suffer if the relevant industry could not generate sufficient revenue to pay back the loans, leading to less onerous interest rates.
A second option was that the government would provide loans at relatively low interest rates to ensure that industries remained solvent.
In a third option, the United States Treasury would take an ownership stake in some of these companies in what amounts to an “at-the-market” offering, in which the companies involved issue more shares at their current market price to the government in exchange for cash to continue business operations.
Each example industry continues to require some sort of government intervention to remain solvent at one point or the other. Auto/banks/saving and loans getting bailouts in 2008/2009. Airlines in 2020/2021 due to COVID etc. These industries employ a lot of people and now have become a political hot zone for voters so there is no way to remove these backstops now.
And whether these industries remain competitive globally is another question. Because it is always funny to hear countries accuse each other of propping up one industry or other through government intervention.
Second, these were industry wide bailouts. This action is not.
The genesis of CHIPS Act is a 2020 deal to onshore TSMC. The idea was to further persuade Samsung and Intel to produce chips in US through tax benefits, loan guarantees and grants. But now with US taking a stake in Intel, the strategy for onshoring TSMC and Samsung becomes unclear. Maybe the idea is to use tariffs to make TSMC and Samsung uncompetitive if they don't onshore but that is a bad idea. Because if Intel finds it easier to just coast on "national security" and continue producing last gen chips, they are going to do that and lower innovation even more. This is a win-win for Intel though.
Also, if you are TSMC and Samsung, why bother “on-shoring” to America and not just make Americans pay the tariffs since there are no alternatives and it is unlikely that America can really compete. They will also be fighting the current as BRICS/Asian momentum picks up right in their front yard.
> the federal government intervened to stabilize a critical industry
They intervened to maintain the status quo. Industries are neither stable or unstable for a long period of time without external influences forcing that outcome. Short term turbulence is to be expected and is beneficial for the market as a whole.
They destroy markets and then lie to your face about it.
> industries remained solvent.
How does an _industry_ become insolvent? Only when it's nearly fully monopolized and when there is no difference between an industry and a single entity. This is where we are currently.
> more shares at their current market price to the government in exchange for cash to continue business operations.
Couldn't they just offer those shares to _any investor at all_? Why is the government special here?
CPU manufacturing without any intervention is likely leading towards a monopoly. Every latest generation fabrication facility costs much more than the previous one. Eventually we’ve reached the point where only three companies (Intel, TSMC, Samsung) are interested in making such a large investment.
> Didn't we already cross this particular Rubicon during the auto bailout a decade ago?
This Darth Vader style "I am altering the deal, pray I do not alter it any further" gambit is new to the best of my knowledge. If the CHIPS Act had been structured so that it was equity purchases that would be one thing.
The other day I went down a rabbit hole reading about the history of insulin, and learned about the Canada Development Corporation:
>The Canada Development Corporation was a Canadian corporation, based in Toronto, created and partly owned by the federal government and charged with developing and maintaining Canadian-controlled companies in the private sector through a mixture of public and private investment. It was technically not a crown corporation as it was intended to generate a profit and was created with the intention that, eventually, the government would own no more than 10% of its holdings; it did not require approvals of the Governor-in-Council for its activities and did not report to parliament. Its objectives and capitalization, however, were set out by parliament and any changes to its objects decided upon by the Board of Directors had to be approved by parliament.
The CDC was created as a result of Walter Gordon's Royal Commission on Canada's Economic Prospects, and the 1968 Watkins Report commissioned by Gordon, in an attempt to redress the problem of foreign ownership in the Canadian economy by stimulating the development of Canadian owned corporations, particularly in the field of natural resources and industry
About 31,000 private shareholders invested in the corporation. An early purchase of the corporation was Connaught Laboratories, the original manufacturer of insulin.
Major investments owned by the CDC included holdings in petroleum, mines and petrochemicals including Polymer Corporation, an asset transferred to it by the Canadian government. By 1982 the Canadian government had a 58% stake in the Savin Corporation.
In 1986 the Corporation was dismantled as part of the Mulroney government's program of privatization.
Polymer Corp itself is a fascinating origination. Created in ww2 to create synthetic rubber - which the Germans had all of the ip of - it was a wildly successful research to commercialization entity. It was so successful after the war it was considered too important to privatize and it stayed as a crown corp for decades.
I believe they even did a run of $10 celebrating it.
Yes and the scale was far larger, over $80 billion given to GM and Chrysler. GM was majority owned by the US government for a number of years after that too.
> could not generate sufficient revenue to pay back the loans
I think there's an oversimplification here. Even at 0% interest the government gets returns on those loans. "Death and taxes", right?
Governments aren't people. If I gift you money, that money doesn't come back to me. But if a government gifts someone money, it makes its way back. As long as that money gets spent, there's returns. Even if you die, and even if you don't have that $14m for the death tax, that money still pays dividends back.
The only way it doesn't is if the economy crumbles or that money is taken out of the entire economy (which is much harder to do considering the dollar being the current global currency). So basically you need to light it on fire.
You can do things to slow that flow but it does come back. A low interest loan is just increasing that flow and this is why a negative interest rate can still generate a return. A company can fail and there'd still be returns through taxes in the mean time. The money doesn't just evaporate.
I think a lot conversations about money get weird because we over generalize what money means, applying money's context for an average person more broadly. But money has a very different context when you're talking about governments, corporations, or even billionaires (due to the shear amount). Nor are those examples the same either.
In this case I think it matters. The government already has a stake in Intel, and in all companies. Shares only decrease the pie available to the public while increases the ability for government official to do insider trading and increases nationalization.
“The Chips Act wasn’t about raising revenue, and an equity share wouldn’t enhance national security.”
Every generation of fab is increasingly expensive. TSMC has over 500 customers, including Intel. Intel basically only has Intel to pay for those $20 billion fabs.
Intel fell behind TSMC around ten years ago and the resulting malaise—still not fixed—almost put them out of business. So yes, they needed a bailout and got one.
That's where the comparison with the auto bailout in the wake of the financial crash falls apart.
Intel got no bailout. The government demanded 10% of the company for financial grants that Intel already received, largely under the Biden administration, under vehicles like the CHIPS act (you know -- the massively successful policy that is the actual reason that a bunch of latest tech chip plants are being built in the US). It's an absolutely bizarre situation, and the only reason Intel would even go along with it is that this administration operates like an extortion racket and would somehow cripple the company otherwise.
My intel powered workstations from 2008 have chips that are more than decent enough for modern computing.
But in reality, they gave up on R&D, Missed Apple mobile chips and then put a lot of MBAs in top leadership positions to make their financial schemes work. Those schemes did not work and they were left without technical leadership. When they got the tech leadership, the board just gave up and fired him and brought in a chop shop CEO to part intel out.
For some reason, the US admin thinks this is a good buy. You probably would too, if you bankrupted multiple casinos.
Intel is going the way of SunBeam, Sears and Toys r Us. The board failed to stop that. And failure attracts more failure.
Sure, it's been done before, but looking at the end result though, I'm not sure if that's a strong argument for whether it should be done again.
Look at the end state of the US auto industry. It's uncompetitive in basically every part of the world and thus basically irrelevant, except in the US. Unless somehow something different is going to happen here, this could end up with Intel continuing to perform poorly, negating the point of keeping it alive to begin with.
Yes, but no. The bailout was companies that were headed for bankruptcy. Is Intel? My impression is that they're a lot further from it than GM and Chrysler were.
Intel had been trading below its cumulative physical assets for a pretty long time.
This means the market believes they have a path to bankruptcy. Since markets are forward looking, how close it is to bankruptcy does not matter too much. In this case they needed money and the government provided a relatively low amount for a pretty significant stake in the company.
Intel the advanced IC manufacturer is worth effectively nothing right now.
If they can prove a successful advanced manufacturing process and start making chips on it that will likely reverse fairly quickly, but it's been a decade since they held fab leadership.
And, so? Government back then wanted something, government right now wants something (slightly?) different?
The reality is any government (USG included) getting 10% share ownership in a company is ... barely news. The more interesting news (or speculation) is whether this is a smart move or not.
Did you also oppose the government stepping in when Silicon Valley Bank collapsed? The FDIC had a clear upper limits. It shouldn't have paid depositors more than that.
> Unlike grants, equity comes at a steep cost to Intel. Transferring grants into equity therefore risks putting Intel at a cost disadvantage relative to other chip makers
A lot of this article seems to rely on this point but the possible cost isn't clarified. I can understand equity arrangements affecting shareholders but how would it reduce the product's competitiveness, notably the unit cost which seems to be the point regards to other chipmakers. If it's about stock price going down, employee comp going down and product effects from that, it seems too speculative?
On the flip side, it sounds like instead of cash over time it becomes a lump cash infusion, which seems like it could result in benefits of its own such as bringing forward timelines.
<< how would it reduce the product's competitiveness
It wouldn't. It is an opinion piece. On that basis alone, knowing what we know about media landscape, it exists as a means of forming opinion and allowable argumentation for the issue at hand.
If that premise is accepted then the piece is there to protect the poor shareholders, who until now were thinking Intel will be getting 'free' government money, but suddenly found the cost of government involvement may be higher. Suddenly, that is a bridge too far. You can grant them money, but, good heavens, think of what you will do if you demand that we give you equity of said money..
I mean.. sure WSJ intended audience, who is bound to nod on 'productivity' line of argumentation, but people with a sense of Intel history ( or most US industries that offshored and now talk reshoring for that matter ) might chuckle at the hutzpah.
The problem here isn't that the government gets involved in businesses. That has always been something they do.
The problem is that these days they do it capriciously, without any sort of plan or intention.
The government played a foundational role in supporting the early stage research that enabled companies like Intel to emerge. Underwriting that sort of long-term investment that wouldn't easily attract commercial capital is a great place for them to be.
Meanwhile, is it even the case that the American chip industry is declining? Apple, Nvidia, and Google all have significant chip manufacturing operations. And this isn't an industry I even follow particularly closesly.
> Apple, Nvidia, and Google all have significant chip manufacturing operations
No, they all (as well as AMD) all have significant chip designing operations. Not one of them can actually fabricate their own chips. Every single one of them must speak to TSMC or Samsung if they want to take their designs from the whiteboard to the physical world.
Thanks for clarifying! I misspoke there, but from my standpoint (portfolio manager/equities investor) that's better.
Wafer fabs are capital intensive, complex, and need constant retooling. The bulk of the commercial value lives in the stuff you do on your whiteboard.
From a geopolitical standpoint, I'll concede there's value in having the ability to actually make the stuff without acceding to the duopoly. But I'd still rather see the capital invested in basic research which might change the capital dynamics of the industry in the intermediate to long term.
Which American companies manufacture chips on the latest node? Certainly not Texas Instruments, Global Foundries and one might even argue Intel, compared to Samsung and TSMC. It is a matter of national security that Intel not fail.
It is a matter of national security that state-of-the-art fabs exist within the nation and that the expertise to operate them also exists within the nation.
As you point out, it is questionable whether Intel has either of these.
It might be argued that it is critical to national security that Intel be replaced by HP. Or Nvidia. Or Sun, or Motorola, or Micron, or TI, or...
What's that you say? Most of those companies had their chance and failed? None of those companies are really in the game?
Why among all the list of failed or current fab owners is it so important that Intel be declared sacred?
Why not recognize that Intel is getting its clock cleaned by a company that doesn't design chips? Why not look outside of the chip design industry to save the chip fab industry?
TSMC was funded by government. The cost requirement for new fabs is beyond the funding private enterprises can muster. Perhaps through funding, years down the road, it may make sense. This isn't about Intel IP, it's about manufacturing high end chips on US soil.
I would agree with your approach if we were simply discussing whether the government should fund intel, but we’ve already committed to funding intel via the government. Pulling back would hurt intel and our interests. Now that intel has become reliant on our promised funding, it makes sense to attach conditions to the funding we need to do instead of just handing it out while getting nothing in return.
The first thing that jumps out is that it is impossible to avoid the absurd juxtaposition of a republican led major national corporate stake, after a decade of the auto bailouts being used as a poster child of policy that the current party in charge doesn't agree with.
Moving on from that, you make a good point that it may be the best compromise if the original deal is off the table. That said, in my eyes the implementation could be better. On both a practical and ideological level, I think it would behoove the dealmakers to lay out clear exit conditions. That could look something like anything from signing a covenant with Intel to freeze dividends and corporate buybacks and pay down debt (which is dangerously high for them currently), and then once the corporate balance sheet gets to a safer level, the US gov could run a public auction for the equity once that strike level is hit. I'm sure they could come up with something palatable. What's unexcusable is to apparently enter into a seemingly permanent zone of CCP-style state corporate capitalism without clearly laying out what that means for America going forwards. As an average citizen, I certainly have questions about the precedents being set, and to me it just looks haphazard and off-the-cuff.
> The first thing that jumps out is that it is impossible to avoid the absurd juxtaposition of a republican led major national corporate stake, after a decade of the auto bailouts being used as a poster child of policy that the current party in charge doesn't agree with.
The only absurd here is to think republicans care about anything other than power . Doesn't matter what they did or said yesterday, what matters is what can they say and do today to remain in power and enable their deep pocketed donors to make more money and gain more power.
People really have to stop thinking there's anything there, there's nothing, its all about acquiring and using power. Trying to come up with ideological reasons as to why they do this or that is useless.
Why have an exit condition at all? I'm not sure what's so inexcusable about what China is doing, by the looks of it, for their nationally important industries, they're doing pretty well.
> The first thing that jumps out is that it is impossible to avoid the absurd juxtaposition of a republican led major national corporate stake
The GOP overthrew its leadership in 2016 and a different faction took control of the party. The GOP started out as an economically interventionist party: https://www.journalofthecivilwarera.org/2017/04/gops-civil-w.... Then it went through a libertarian phase in the mid 20th century. Now its back to an economically interventionist party.
This is misunderstanding what really happened. The oroginal agreement with the CHIPS act is that if your company is profitable post expansion funding then you will profit share with the federal government. Trump changed that original agreement to one of stock ownership. Now the federal government can reneg the deal by selling back for their money any time. Arguably more dangerous than profit sharing.
It was never a nothing-in-return agreement, that is fiction.[0]
> if your company is profitable post expansion funding then you will profit share with the federal government.
Not to mention... taxes...
I mean I agree with you but even that article is talking about how it's not a free handout. It never could have been. A government could hand out money unconditionally and they'd still get a return as long as taxes exist. Intel's (or any company's) success results in them paying more taxes. Not just corporate taxes either.
The entire point of the funding is the strategic benefit that Intel's fabs in the US provide. That's the thing the US would get out of it.
Also consider: Who is the $10 billion coming from? Because it's not Intel. Intel just prints the shares out of thin air. This is Trump stealing $10 billion directly from Intel's shareholders, who get nothing in return because Trump is legally required to disburse the CHIPS Act money.
It's also just a complete misunderstanding in how a governments vehicle for investment works compared to a person's.
A person invests in a stock, hopes it goes up, and makes a profit (or loss) when they sell. That money isn't real until a sale occurs.
A government gives a grant and gets a return tomorrow and every single day of the company's existence as well as every single day each employee exists (even if the company doesn't). If a company exists, it pays corporate taxes. If that company has employees (as every company does), it pays payroll taxes. If that company has employees, they pay income taxes and various forms of consumption taxes.
IDK why we act like a grant is akin to lighting money on fire. Governments don't give out grants for nothing. They're still benefiting from it. Sure, the vehicles for return are different from a standard investment but also a government isn't a person. Well I should take that last part back. A government is a person in an autocracy (monarchy/dictatorship/theocracy/etc), but that shouldn't even be on the table.
this is the logical conclusion of outsourcing: we kept giving away the low end electronics and now we can't compete on the high end w/o government subsidy
the supply chain moved to asia and the just so stories about ricardian free trade + an inflated stock market made everyone believe, while the ultra-rich got ultra-ultra-rich
and now we sit down to our banquet of consequences
From my pov, it looks more like intel shit the bed repeatedly.
Missed on: mobile, custom chips in the data center, graphics cards, ai, and building out fab services they can sell.
Meanwhile, they took at least 5 years off of making their chips faster, and we're treated to the absurdity that the m-series chips are as performant in single core as anything Intel can build on a power budget 1/10th of Intel's.
I'm not sure what that has to do with outsourcing? It looks more like a comprehensive lack of execution.
Intel should have spun out their fab in 2009-2010 when the signs were clear: Mobile was taking off, AMD spun out their fab, Intel had missed the boat on mobile CPUs, and Apple had acquired PA Semi and was investing heavily in custom silicon.
High-end fab is a volume game and that was the time frame when Intel was still process competitive and could have competed for Apple's business (and Nvidia's, ...). But that would never happen as a division of Intel, nobody wants to send their designs to a competitor.
Intel was (is?) the largest sponsor of EE H-1Bs. Most such people coming from two countries where it's practically impossible to win the green card lottery. The upshot of that is a massive brain drain when these people have to leave.
Readit News
Other examples:
> Since the 1950s, the federal government has stepped in as a backstop for railroads, farm credit, airlines (twice), automotive companies, savings and loan companies, banks, and farmers.
Every situation has its own idiosyncrasies, but in each, the federal government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have left the average taxpayer much worse off. In some instances, the treasury guaranteed loans, meaning that creditors would not suffer if the relevant industry could not generate sufficient revenue to pay back the loans, leading to less onerous interest rates.
A second option was that the government would provide loans at relatively low interest rates to ensure that industries remained solvent.
In a third option, the United States Treasury would take an ownership stake in some of these companies in what amounts to an “at-the-market” offering, in which the companies involved issue more shares at their current market price to the government in exchange for cash to continue business operations.
https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...
Each example industry continues to require some sort of government intervention to remain solvent at one point or the other. Auto/banks/saving and loans getting bailouts in 2008/2009. Airlines in 2020/2021 due to COVID etc. These industries employ a lot of people and now have become a political hot zone for voters so there is no way to remove these backstops now.
And whether these industries remain competitive globally is another question. Because it is always funny to hear countries accuse each other of propping up one industry or other through government intervention.
Second, these were industry wide bailouts. This action is not.
The genesis of CHIPS Act is a 2020 deal to onshore TSMC. The idea was to further persuade Samsung and Intel to produce chips in US through tax benefits, loan guarantees and grants. But now with US taking a stake in Intel, the strategy for onshoring TSMC and Samsung becomes unclear. Maybe the idea is to use tariffs to make TSMC and Samsung uncompetitive if they don't onshore but that is a bad idea. Because if Intel finds it easier to just coast on "national security" and continue producing last gen chips, they are going to do that and lower innovation even more. This is a win-win for Intel though.
They intervened to maintain the status quo. Industries are neither stable or unstable for a long period of time without external influences forcing that outcome. Short term turbulence is to be expected and is beneficial for the market as a whole.
They destroy markets and then lie to your face about it.
> industries remained solvent.
How does an _industry_ become insolvent? Only when it's nearly fully monopolized and when there is no difference between an industry and a single entity. This is where we are currently.
> more shares at their current market price to the government in exchange for cash to continue business operations.
Couldn't they just offer those shares to _any investor at all_? Why is the government special here?
> https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...
Of course. Chicago school thinking. It's infected our country for decades now. Certainly not to the benefit of it's citizens.
Dead Comment
This Darth Vader style "I am altering the deal, pray I do not alter it any further" gambit is new to the best of my knowledge. If the CHIPS Act had been structured so that it was equity purchases that would be one thing.
>The Canada Development Corporation was a Canadian corporation, based in Toronto, created and partly owned by the federal government and charged with developing and maintaining Canadian-controlled companies in the private sector through a mixture of public and private investment. It was technically not a crown corporation as it was intended to generate a profit and was created with the intention that, eventually, the government would own no more than 10% of its holdings; it did not require approvals of the Governor-in-Council for its activities and did not report to parliament. Its objectives and capitalization, however, were set out by parliament and any changes to its objects decided upon by the Board of Directors had to be approved by parliament.
The CDC was created as a result of Walter Gordon's Royal Commission on Canada's Economic Prospects, and the 1968 Watkins Report commissioned by Gordon, in an attempt to redress the problem of foreign ownership in the Canadian economy by stimulating the development of Canadian owned corporations, particularly in the field of natural resources and industry
About 31,000 private shareholders invested in the corporation. An early purchase of the corporation was Connaught Laboratories, the original manufacturer of insulin.
Major investments owned by the CDC included holdings in petroleum, mines and petrochemicals including Polymer Corporation, an asset transferred to it by the Canadian government. By 1982 the Canadian government had a 58% stake in the Savin Corporation.
In 1986 the Corporation was dismantled as part of the Mulroney government's program of privatization.
https://en.wikipedia.org/wiki/Canada_Development_Corporation
I believe they even did a run of $10 celebrating it.
We nationalised passenger rail in the 60s.
Governments aren't people. If I gift you money, that money doesn't come back to me. But if a government gifts someone money, it makes its way back. As long as that money gets spent, there's returns. Even if you die, and even if you don't have that $14m for the death tax, that money still pays dividends back.
The only way it doesn't is if the economy crumbles or that money is taken out of the entire economy (which is much harder to do considering the dollar being the current global currency). So basically you need to light it on fire.
You can do things to slow that flow but it does come back. A low interest loan is just increasing that flow and this is why a negative interest rate can still generate a return. A company can fail and there'd still be returns through taxes in the mean time. The money doesn't just evaporate.
I think a lot conversations about money get weird because we over generalize what money means, applying money's context for an average person more broadly. But money has a very different context when you're talking about governments, corporations, or even billionaires (due to the shear amount). Nor are those examples the same either.
In this case I think it matters. The government already has a stake in Intel, and in all companies. Shares only decrease the pie available to the public while increases the ability for government official to do insider trading and increases nationalization.
Like, for example, the government could give me a few billion bucks and everything you said would still be correct. I would also spend it, etc. etc.
“The Chips Act wasn’t about raising revenue, and an equity share wouldn’t enhance national security.”
Every generation of fab is increasingly expensive. TSMC has over 500 customers, including Intel. Intel basically only has Intel to pay for those $20 billion fabs.
Itanium was a flop from bad business decisions IIRC. Note too that x86-64 was developed by AMD, and Intel licensed it from them.
Intel got no bailout. The government demanded 10% of the company for financial grants that Intel already received, largely under the Biden administration, under vehicles like the CHIPS act (you know -- the massively successful policy that is the actual reason that a bunch of latest tech chip plants are being built in the US). It's an absolutely bizarre situation, and the only reason Intel would even go along with it is that this administration operates like an extortion racket and would somehow cripple the company otherwise.
But in reality, they gave up on R&D, Missed Apple mobile chips and then put a lot of MBAs in top leadership positions to make their financial schemes work. Those schemes did not work and they were left without technical leadership. When they got the tech leadership, the board just gave up and fired him and brought in a chop shop CEO to part intel out.
For some reason, the US admin thinks this is a good buy. You probably would too, if you bankrupted multiple casinos.
Intel is going the way of SunBeam, Sears and Toys r Us. The board failed to stop that. And failure attracts more failure.
Look at the end state of the US auto industry. It's uncompetitive in basically every part of the world and thus basically irrelevant, except in the US. Unless somehow something different is going to happen here, this could end up with Intel continuing to perform poorly, negating the point of keeping it alive to begin with.
This means the market believes they have a path to bankruptcy. Since markets are forward looking, how close it is to bankruptcy does not matter too much. In this case they needed money and the government provided a relatively low amount for a pretty significant stake in the company.
Intel the advanced IC manufacturer is worth effectively nothing right now.
If they can prove a successful advanced manufacturing process and start making chips on it that will likely reverse fairly quickly, but it's been a decade since they held fab leadership.
The reality is any government (USG included) getting 10% share ownership in a company is ... barely news. The more interesting news (or speculation) is whether this is a smart move or not.
I guess we'll never know what would have, no matter how sure you seem to be.
I, for one, am still a little bitter about what could have been if not for a couple of those bailouts.
A lot of this article seems to rely on this point but the possible cost isn't clarified. I can understand equity arrangements affecting shareholders but how would it reduce the product's competitiveness, notably the unit cost which seems to be the point regards to other chipmakers. If it's about stock price going down, employee comp going down and product effects from that, it seems too speculative?
On the flip side, it sounds like instead of cash over time it becomes a lump cash infusion, which seems like it could result in benefits of its own such as bringing forward timelines.
It wouldn't. It is an opinion piece. On that basis alone, knowing what we know about media landscape, it exists as a means of forming opinion and allowable argumentation for the issue at hand.
If that premise is accepted then the piece is there to protect the poor shareholders, who until now were thinking Intel will be getting 'free' government money, but suddenly found the cost of government involvement may be higher. Suddenly, that is a bridge too far. You can grant them money, but, good heavens, think of what you will do if you demand that we give you equity of said money..
I mean.. sure WSJ intended audience, who is bound to nod on 'productivity' line of argumentation, but people with a sense of Intel history ( or most US industries that offshored and now talk reshoring for that matter ) might chuckle at the hutzpah.
The problem is that these days they do it capriciously, without any sort of plan or intention.
The government played a foundational role in supporting the early stage research that enabled companies like Intel to emerge. Underwriting that sort of long-term investment that wouldn't easily attract commercial capital is a great place for them to be.
Meanwhile, is it even the case that the American chip industry is declining? Apple, Nvidia, and Google all have significant chip manufacturing operations. And this isn't an industry I even follow particularly closesly.
No, they all (as well as AMD) all have significant chip designing operations. Not one of them can actually fabricate their own chips. Every single one of them must speak to TSMC or Samsung if they want to take their designs from the whiteboard to the physical world.
Wafer fabs are capital intensive, complex, and need constant retooling. The bulk of the commercial value lives in the stuff you do on your whiteboard.
From a geopolitical standpoint, I'll concede there's value in having the ability to actually make the stuff without acceding to the duopoly. But I'd still rather see the capital invested in basic research which might change the capital dynamics of the industry in the intermediate to long term.
As you point out, it is questionable whether Intel has either of these.
It might be argued that it is critical to national security that Intel be replaced by HP. Or Nvidia. Or Sun, or Motorola, or Micron, or TI, or...
What's that you say? Most of those companies had their chance and failed? None of those companies are really in the game?
Why among all the list of failed or current fab owners is it so important that Intel be declared sacred?
Why not recognize that Intel is getting its clock cleaned by a company that doesn't design chips? Why not look outside of the chip design industry to save the chip fab industry?
Government should own a stake in every business, and citizens should then get shares in that government fund.
Moving on from that, you make a good point that it may be the best compromise if the original deal is off the table. That said, in my eyes the implementation could be better. On both a practical and ideological level, I think it would behoove the dealmakers to lay out clear exit conditions. That could look something like anything from signing a covenant with Intel to freeze dividends and corporate buybacks and pay down debt (which is dangerously high for them currently), and then once the corporate balance sheet gets to a safer level, the US gov could run a public auction for the equity once that strike level is hit. I'm sure they could come up with something palatable. What's unexcusable is to apparently enter into a seemingly permanent zone of CCP-style state corporate capitalism without clearly laying out what that means for America going forwards. As an average citizen, I certainly have questions about the precedents being set, and to me it just looks haphazard and off-the-cuff.
The only absurd here is to think republicans care about anything other than power . Doesn't matter what they did or said yesterday, what matters is what can they say and do today to remain in power and enable their deep pocketed donors to make more money and gain more power.
People really have to stop thinking there's anything there, there's nothing, its all about acquiring and using power. Trying to come up with ideological reasons as to why they do this or that is useless.
https://www.nytimes.com/2008/12/20/business/20auto.html
The GOP overthrew its leadership in 2016 and a different faction took control of the party. The GOP started out as an economically interventionist party: https://www.journalofthecivilwarera.org/2017/04/gops-civil-w.... Then it went through a libertarian phase in the mid 20th century. Now its back to an economically interventionist party.
It was never a nothing-in-return agreement, that is fiction.[0]
[0] “Biden to require chips companies winning subsidies to share excess profits” >> https://www.reuters.com/technology/us-require-companies-winn...
I mean I agree with you but even that article is talking about how it's not a free handout. It never could have been. A government could hand out money unconditionally and they'd still get a return as long as taxes exist. Intel's (or any company's) success results in them paying more taxes. Not just corporate taxes either.
Also consider: Who is the $10 billion coming from? Because it's not Intel. Intel just prints the shares out of thin air. This is Trump stealing $10 billion directly from Intel's shareholders, who get nothing in return because Trump is legally required to disburse the CHIPS Act money.
A person invests in a stock, hopes it goes up, and makes a profit (or loss) when they sell. That money isn't real until a sale occurs.
A government gives a grant and gets a return tomorrow and every single day of the company's existence as well as every single day each employee exists (even if the company doesn't). If a company exists, it pays corporate taxes. If that company has employees (as every company does), it pays payroll taxes. If that company has employees, they pay income taxes and various forms of consumption taxes.
IDK why we act like a grant is akin to lighting money on fire. Governments don't give out grants for nothing. They're still benefiting from it. Sure, the vehicles for return are different from a standard investment but also a government isn't a person. Well I should take that last part back. A government is a person in an autocracy (monarchy/dictatorship/theocracy/etc), but that shouldn't even be on the table.
Dead Comment
the supply chain moved to asia and the just so stories about ricardian free trade + an inflated stock market made everyone believe, while the ultra-rich got ultra-ultra-rich
and now we sit down to our banquet of consequences
Missed on: mobile, custom chips in the data center, graphics cards, ai, and building out fab services they can sell.
Meanwhile, they took at least 5 years off of making their chips faster, and we're treated to the absurdity that the m-series chips are as performant in single core as anything Intel can build on a power budget 1/10th of Intel's.
I'm not sure what that has to do with outsourcing? It looks more like a comprehensive lack of execution.
High-end fab is a volume game and that was the time frame when Intel was still process competitive and could have competed for Apple's business (and Nvidia's, ...). But that would never happen as a division of Intel, nobody wants to send their designs to a competitor.
Dead Comment