They'll do it too. They'll catch up, because it's in the US Government's interest for them to catch up. Buy Intel Stock.
That said, I think government encouragement is a critical piece of the puzzle and should derisk this operation. The recent supply shocks to the computer industry, when component prices and lead times shot up independent of any geopolitical conflicts (other than COVID), must have been a wake-up call to many that the US's relative lack of foundry capabilities has real strategic implications.
Oddly, this is a pretty similar pattern to what we've seen with other companies before they divest/outsource manufacturing. Their internal efforts stumble due to lack of drive/funding, followed by a lucrative buyout or sale of their manufacturing operations to an oversees buyer.
I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center.
This is interesting to me, because I think of it as the stereotypical (if not always accurate) description of American business. The common criticism of American companies is that they outsource productive capacity, go "asset-lean", lever up on their intellectual property, over-financialise etc etc. I've generally thought of the preference for investing in "manufacturing/production" to be a populist sentiment, and out of favour in the boardroom.
There are certainly plenty of examples of both types, but in the semiconductor space the trend is clear -- manufacturing has been outsourced from the US, and the old big chip brands mostly stopped making their own chips.
And until recently I've been mostly sympathetic to (what I think is) your view, which I've also ascribed to the stereotype of "corporate America" -- that companies should put their capital to its most productive work, and that mostly that means "intellectual property and innovation" or some similar vague notion. Ricardian comparative advantage and all that.
One thing that's given me pause has been arguments like this: https://berthub.eu/articles/posts/how-tech-loses-out/. Very roughly, that production involves a necessary kind of innovation, and that intellectual property advantages can be less durable than process advantages.
https://s3.amazonaws.com/s3.documentcloud.org/documents/6974...
Intel's selling at something like 12x earnings. The fab business is another devision in the company, not an alternative to selling chips.
With their yearly cadence, if they deliver, they will take back the share they've lost and then some.
Their designs are still superior to AMD, they have just been slower to finish them and roll them out. With improved execution and vertical integration, they should be beating competitors on performance, efficiency and price.
If they stick to their new product road map, they should be taking back market share from AMD in full by 2023.
Intel's R+D spending (13 billion U.S. dollars) is already larger than the entire annual NSF budget (10 billion).
How much did we spend on the Iraq War, despite our own country being a major producer of oil and gas? Our economic incentive to entangle ourselves in Taiwan is even greater, but the stakes of military confrontation with China would be more dangerous. How much would you pay to avert such a conflict -- or worse, to avert the consequences of acquiescing to China's expansionism? Ironically, dependency on Taiwanese semiconductor fabrication reduces our ability to defend the island. Until the time that a fab interruption there would not halt our economy, Taiwan remains a US pressure point and China will continue to press it.
I think $200 billion is a cheap price tag for a path forward that involves neither warfare nor perpetual paranoia about every perturbation in the South China Sea. Taiwan established itself as a semiconductor powerhouse largely because its government backed TSMC. South Korea's government bends over backwards for Samsung, which makes up about a fifth of their GDP. The way forward for the US may be similar in mentality: throw the government behind the industry. US fabs need resilient and high-quality infrastructure for power, water, and logistics. We can use the collimated power and authority of the government to yield a vastly more effective long-term solution than piecemeal tax credits on lithography scanners.
[0] https://www.cnbc.com/2019/06/04/china-ramps-up-own-semicondu...
I'd be curious to see this quantified in some way. TSMC has a lead at the moment for bleeding edge fabrication, but Intel isnt that far behind and is massive in scale (revenue is nearly double TSMC, though its not an apples to apples comparison). A lot of the most impactful shortages this past year were in non-sexy parts like microcontrollers and other lower end chips that can be built in many different countries, since they are fairly simple (28nm, 40nm and even larger processes are commonly used).
The world is intertangled enough that losing Taiwan for some reason would be pretty bad, but I cant think of another country better equipped to handle semiconductor production than the US (Korea and Japan do well also, but at smaller scale than the US).
Pull up a table of companies with cutting edge foundries by year. The list perpetually grows shorter as the cost to remain competitive grows higher.
>> How much did we spend on the Iraq War, despite our own country being a major producer of oil and gas?
With all due respect, from 2004 - 2007, all we were talking about is Peak Oil and US was not such a major producer then as we are today. So some recency bias here.
>>The way forward for the US may be similar in mentality: throw the government behind the industry.
Yes, US will become mercantilist again, and I will rejoice but the goddamn world will burn or not.
Sure, the semi shortage is a big deal to the auto industry, but the autos are almost rounding error to the semi industry.
Strong disagree. What kind of application would not be able to run at all on Intel's latest processors? I can't think of anything aside from maybe some future development of VR.
Most HNers deal with software engineering, but the rest of the world simply does not have to have the latest and greatest. Assuming Intel stays in the back and the West has to use only Intel, applications will be a bit slower, processors will use a bit more power, there will be more focus on software efficiency and parallelism, and more cloud streaming. Hardly "entirely dependent".
Modern IT infrastructure needs lots of different kinds of chips, not just CPUs. Most of them aren't manufactured in the US. If chips stopped shipping from Taiwan tomorrow, then sure, people would scramble to switch to other manufacturing, and presumably some of the gap could be filled from existing products or of Korea, but getting a design up on a new process can easily take a year, often more. Not to mention that building up raw fab capacity takes time as well.
The impact on supply chains in the short term would be devastating even if the long term can be gotten under control. If the short term includes a war with China, then, well... it certainly complicates any sort of military scenario.
That's only relevant to companies that have to build all their own CPUs.
The world is not HackerNews. 99.999999% of companies can do with the radical idea of using an existing older, slower, perhaps more power hungry processor. [It can be argued this already happened - all the Spectre/Meltdown mitigations costing performance, and the world kept trucking on]. Apple's bottom line may be temporarily hurt, and AMD will be in trouble, but that's hardly an economy-shaking threat.
>Not to mention that building up raw fab capacity takes time as well.
TSMC is actually rather small in the raw picture.
>The impact on supply chains in the short term would be devastating even if the long term can be gotten under control.
We were just having a huge pandemic. We can handle merely another chip shortage.
>If the short term includes a war with China, then, well...
Which is a different matter entirely.
> How much would you pay to avert such a conflict -- or worse, to avert the consequences of acquiescing to China's expansionism?
These are questions easier to answer than what most people think.
There are countless unclassified defence studies with very good estimates of how much would USA loose in case of an all out war with a nuclear state for worst, medium, best scenarios. I'll encourage readers to check them themselves.
Washington defence planners are most well aware of these things.
The later question is much more important, and with more real world relevance.
> consequences of acquiescing to China's expansionism?
There is no limit on on how much "acquiescing" you can do before such states will come up with more claims.
Remember "Finlandisation" precluding the WW2, and how it ended.
Giving the most minimal concessions to such opponent will instantly lead to them wanting more, and more, until you will have to retaliate, but now against much stronger enemy.
There is no "strategy," no political trick that works against opponent planning to attack you from the start no matter what. All treaties, political manoeuvres, compromise moves, even overt tribute payments will be only delaying the inevitable encounter in cul de sac.
In Russia, people gave a simple way to characterise behaviour of such people: "A guy who wouldn't stop until punched in the face."
Finlandization means strong country affecting a small neighbour, not applicable to pre-WW2 appeasement policies.
It's big power saying "let them have it" basically, and to disastrous results every time.
Now, does that mean intel will actually be effective? I have my doubts, baring some sort of shotgun approach where multiple experimental fabs are done simultaneously.
They have the resources and history to recover. I have heard references to massive managerial layer problems and treating contractors like crap and the brain drain of the old guard, but those aren't intractable problems.
Intel has responded in the past. AMD looked completely dead in the Hector Ruiz waning days, and look at them now. Empower some good engineers and watch what happens.
Almost guarantee what that is: management building a huge pyramid reporting structure and then enriching themselves. To avoid reducing profits (which would threaten the bigwig C-level strike price options), they simply steal from the "proles", in this case the engineers that made the company.
Good news is: it's easy to clean house on shitty managers. Just drop half the layers or more, and then hire or acquire some good.
The other thing Intel had going for it back in the day: there were at least a couple teams working on x86 execution, so when Netburst crapped out they at least had the Israeli team working on the mobile architecture to switch to.
Intel's big enough that if you need two microarchitecture approaches, or even need to start an ARM project, well, they have the revenue if they want the talent.
I mean, look at what Apple did, they practically built the top-end chip in mobile within, what, four or five years? I guess I don't know exactly when they started working on an in-house A-series processors vs when they took leadership. But it didn't take long it seems, certainly relative to the four-year wishywashy timeframe being suggested now.
I'm pretty sure Intel will eventually triumph and reclaim their crown, but I wonder if what more the gov't can do to speed up their way to the top? I don't think the company was held back by red tapes or lack of R&D, capital funding (or tax incentive).
1. It causes Intel to optimize for government money, similar to the many aerospace contractors 2. The government could acquire a stake in Intel, as it did with many companies under TARP during the 2008 Financial Crisis
But GloFo is falling behind for sure. I don't think POWER10 will be made at GloFo.
That's a lot of USA-locations. I'm not sure what your point is exactly?
This isn't about jobs, but control. GloFo can pull out/dismantle/sell any time.
The American manufacturers are not just Intel and Glofo, but also Micron and TI and a few others.
TSMC and Samsung will get some (iirc Samsung is currently making chips in Texas actually, but that's relatively recent)
Samsung has been making chips in Austin, TX since late 1990's and by mid-90's the company was making most of Apple's APs there -- remember when Tim Apple defended its China outsourcing practices by pointing out that "the engines" of their portable devices were in fact made in the US in a rare CBS interview in early 2010? Apple quickly switched to TSMC in Taiwan after that.
It seems like Samsung in turn turned their Austin production to mostly memory production lines (and some logic chips for Tesla) after Apple left for China/Taiwan.
What we are worried about is China's increasingly large Navy, their raw ambition, and the weakening of the US Navy (due to budget cuts planned out decades ago).
China may decide to attack Taiwan, which would cause Taiwan to lose chip production, which would hamper the US.
TSMC making a backup fab in the USA would be beneficial to both Taiwan and the USA. If Taiwan gets attacked, they can still supply chips.
It's about physical security afforded by the US mainland. It's a lot harder for China to attack Arizona than it is to attack Taiwan.
Relative to the height of the Cold war, sure, but the US Navy still has 5 times more ( and much bigger) aircraft carriers than the next navy; and leads the other navies with similar multiples in submarines, various types of ships, airplanes, rocket and anti-rocket capabilities etc. etc.
The US Navy has a decent-ish chance in an engagement with the Chinese Navy for at least the next few decades, assuming the engagement takes place outside of the range of the Chinese air force.
The issue with Taiwan is that any realistic engagement of China vs Taiwan means that Chinese Navy is in 100% support of its Air Force.
You're right. US Navy still dominates China outside of its missile / air force range. But China likely sees an opportunity to make a move vs Taiwan within the next 10 years (before this US Navy issue is patched up with the next generation of warships).
The next stage for China vs US potential combat isn't Madagascar... its Taiwan. A nation that's well within range of China's cruise missiles, air force, and mainland (so easily resupplying Chinese Navy). The US would be fighting with significant disadvantages if a Taiwan war were to ever break out.