Intel CEO Cites Brexit as Reason for Chip Fab Plans in UK Not an Option
techpowerup.com
techpowerup.com
I can’t see a situation in which the UK couldn’t have made a sufficiently enticing proposition when it comes to pure commercials.
That said I think the main factor here is that Intel is afraid of a protectionist EU policy as far as manufacturing IP goes with ASML being a Dutch company it puts the entire semi industry at the mercy of the EU if they do decide to push for a protectionist regime to bring back manufacturing closer to home.
Many other European companies also play a key role in the industry such as Philips (a lot of material engineering and manufacturing techniques) and Carl Zeiss (who makes the extremely specialized lenses and optical assemblies for lithography particularly for UV processes).
So whilst the EU doesn’t have manufacturing capacity especially when it comes to leading nodes they are in a better position to half the global production of advanced semi conductors and ICs than anyone else really.
Well his father-in-law is N. R. Narayana Murthy so he was probably thinking the IR35 rule changes were pretty good for Unisys.
<cough> conflictofinterests <cough>
I mean he’d probably deny he was in favour of moving British jobs off shore but that is what his in-law’s family business is all about so…
/Rant
IR35 is meant to target disguised employment i.e. someone turning up to do the same job as people sitting at the next desk who are salaried.
The latest IR35 changes moved responsibility for policing IR35 onto the client (for large companies) engaging the contractor's company so these large companies started taking notice as they had a new risk
Even then it's still possible to be outside IR35 - provide your own hardware, fix issues you create at your own cost etc.
The big thing that originally brought in IR35 (20 odd years ago) is contractors spending 5yrs at companies essentially doing the same job as permit staff, which avoiding paying employers NI etc.
Since the recent changes, large numbers of freelance or contract positions are being deemed inside IR35, often without a proper assessment and in some cases even forced into an umbrella arrangement. Whether or not they were actually disguised employment does not matter to many clients affected by the changes.
The result is that even genuine independents are ending up with all the tax implications of employment and yet none of the benefits, while still carrying all the risks and overheads of operating as an independent business, the worst of both worlds. Obviously that is not an attractive arrangement and that is why many people have gone permanent and many clients have had to become employers, losing the useful flexibility on both sides.
A consequence of this is that the overall market for independent flexible labour has also shrunk, which makes it less efficient for clients still wanting to use it properly and increases risk and puts downward pressure on rates for the freelancers and contractors.
No doubt there was always some abuse of the system for disguised employment purposes, but the evidence has always been sketchy about how much that really happened, and the changes in recent years have also hit the legitimate part of the independent workforce hard even if it was not the intended target.
When I was employee I worked at places were there were many contractors who were essentially disguised employees and being paid for their time, rather than on a project basis with anything at risk
Who knows how we ever got to the position of nurses, and lorry drivers being employed on a limited company basis - probably because the 'employers' wanted to avoid the NI bill
However, I pay less tax to HMRC overall now than when I was a contractor, around £13k annually. It's completely bonkers.
I'm struggling to find any logical reason for extending the off payroll rules to IT contractors/Lorry drivers etc. I can only assume Rishi pushed it through to benefit his FIL.
How different is your gross as a permit + employers NI, versus what your company turned over as a contractor?
In theory, market forces should have pushed freelance and contract rates up to compensate for those changes, but in practice the opposite has happened. Because the IR35 changes have driven an industry-wide shift towards blanket inside-IR35 or umbrella policies at many larger clients all at the same time, they have been able to push their rates down to help offset their own extra costs (or, in some cases, simply stopped taking on independent labour altogether), and in one recent survey the average independent had actually reduced their rate this year.
If we're looking at the overall financial situation for employees vs. (genuine) independents and not limiting the discussion to tax/NI specifically, you also have to look at flexibility, particularly issues like business expenses and the ability to spread your personal income over time if your business revenues are irregular. These are important aspects of flexible work that have also been damaged by the recent IR35 changes and will often end up costing a legitimate freelancer or contractor more now.
The first is that the contractor isn't evading any tax, maybe the client are, but then you should go after the client right? Not just hit the contractor even harder...
The second is whether you should include NI in you calculations. My default might be yes, but given contractors (and clients) get none of the benefits of paying NI (no state pension, no sick pay, no covid payments!), is that actually fair?
I personally think the issue here is that we've decided to tax payments from capital (dividends etc) at a much lower rate than those from labour.
But it's actually not trivial to decide whether a payment is from labour or capital. So now we're trying to "equalise" them to make it fair between employees and contractors. But unless we're prepared to equalise all other treatment of contractors (make us permanent, give us maternity leave, covid payments etc) we're not actually making anything fair.
I don't actually want to be an employee. But if we're making that illegal, that's that, but then I'm owed 101 benefits and ir35 is strangely silent on those...
In the case of contractors are dividends really payment from capital (accounting wise yet, reality no because most take an unrealistic salary)
The dividend tax essentially compensates for the loss of Employees NI (but not employers)
I'd like to see income tax and NI merged, so unearned income (e.g. buy to let rent) and earned income are treated the same way.
No-one's making freelancing illegal, it's possible to freelance outside IR35, you just need to make sure you're not behaving like an employee (and yes that depends on the clients you work for too)
This is only if your caught but IR35 isn't it though
And the answer to that is to pay yourself a larger salary rather than by dividends (or course that means you've got to pay employers NI)
It also shows Intel is serious about being an IDM. And their expansion plan and OpeX are very aggressive, compare to TSMC which is a conservative company.
[0]: In France, Grenoble could be a good place. Anyway, everywhere in the EU would be good for the world level balance.
About ten years ago (so may not still be accurate) there were more chip design companies concentrated around Bristol / Bath area than anywhere else outside Silicon Valley
Was often cited as a legacy of Transputer being based in Bristol / South Wales
https://www.bbc.co.uk/news/business-58820599
"I have no idea whether we would have had a superior site from the UK," he said. "But we now have about 70 proposals for sites across Europe from maybe 10 different countries.
"We're hopeful that we'll get to agreement on a site, as well as support from the EU... before the end of this year."
If Brexit becomes a permanent state of crisis, the UK will cease to attract inward investment.
On the other hand, if what we are currently seeing is just the teething pains of the new order combined with the post-pandemic-supply-chain-reboot, then I expect the UK will return to being a known quantity and more or less business as usual.
I feel like the UK was competitive when it was competing with European countries. Competing with countries in the EU? I just have no idea why anyone would invest in businesses there. It just feels like an inferior option, unless labor costs fall like a rock.
I think over time, the deals the UK gets will get worse and worse, not just on investment, but on everything.
It doesn't help that China still thinks of opium wars when the UK comes up, India things of the British Empire, and much of the rest of the world feels the same way. The UK was always respected, but never loved. If that respect goes away...
Something feels very rotten about British society today.
Sure they were lied and tricked but they are adults. If they spent a second thinking about potential fallout then maybe they would make a smarter decision.
At least the army is delivering petrol now, so all good. Maybe they can man the abbatoirs too, and deliver the turkeys.
That wasn’t the case, it was won with a small margin.
souce: im from Ireland, feel really sorry for any business wanting to setup there or are escaping the Brexit basketcase next door
Most people are pretty damn happy that we're in a situation where business will be able to export to the UK and all of it's future trading partners AND the EU with all of its future partners without much friction.
Granted, it hasn't all been smooth sailing, but the next election cycle here should provide a lot of clarity as to whether or not the place can become a great base to trade from.
Why would anyone setup shop in NI if they have no certainty that NI's unique access to UK and EU markets wont be shredded up by numpties who still think its the 17th century
* Prior to Brexit, I reckon the UK's main selling-point to US and Asian multinationals was that it's a perfect beachhead into mainland Europe, namely as everyone speaks English already, so localization (well, localisation) doesn't need to be a concern at-first, and allows companies to test-the-water by marketing locally in the British Isles before expanding into the rest of mainland Europe.
* As the UK's regulatory environment was in the EU it meant that getting sign-off from British regulators (again: where language and cultural-barriers won't be an issue) is more straightforward as you don't need to seek regulatory approval in every EU country, only 1.
* Extant supply of highly-qualified, if not world-leading, scientists, researchers and engineers and access to its higher-education system - and those researchers and engs would have included more of mainland Europe's best too due to greater academic collaboration within the EU.
Post-Brexit: all the UK has is... speaking English, and that's it. Now non-EU companies need to seek regulatory approval in both the EU and UK - and the EU's market is considerably larger.
------
I reckon within a decade the UK will find some way to rejoin the more important parts of the EU in-all-but-name, including (possibly!) even joining Schengen to alleviate all of the issues with labour shortages, tourism, and the rest - as well as seeking de-jure regulatory alignment - because the UK is really not the super-desirable market the Daily Express likes to believe it is.
I also sincerely believe the UK will also likely rejoin the EU proper - probably within a generation from now: the age demographics of the leave and remain demographics are stark - it's even been said if the Brexit referendum were held 2 years later then remain would have won simply because enough members of older generations (which lean heavily Leave) would have died off.
Isn't it also possible that some remainers, a few years older, would have changed their mind?
https://yougov.co.uk/topics/politics/articles-reports/2021/0...
It's "possible" but it's also no where near enough people.
I cannot think of any rational thought process behind voting Remain in 2016 and then hypothetically voting Leave in 2021.
The other is that they wouldn't vote "remain", they would vote "join". There is always a resistance to change.
1.3M people are reckoned to have left the UK during the pandemic / post Brexit and don't think they're coming back
There are plenty of rational reasons that someone might have come down on the Remain side before but swung the other way now. The EU has arguably proved several of the major criticisms made by the more reasonable Leave supporters correct since then. There was criticism of the democratic deficit. Now we have Ursula von der Leyen running the show and (figuratively speaking) no-one is quite sure how she got there. There was criticism that the EU was excessively bureaucratic, litigious and slow-moving, and that member states were fair weather friends. Then we saw the handling of the COVID/vaccine and immigration/refugee issues. And the more extreme predictions of British life as we know it coming to an end haven't happened either (at least not because of Brexit).
Of course, there are also plenty of rational reasons that someone might have come down on the Leave side before but now think it was the wrong choice. Several of the major warnings given by the more reasonable Remain supporters have also proved to be well founded, particularly in terms of the immediate consequences of the extra trade barriers and the limitations on free movement of labour.
I'm not taking any side here, just pointing out that both sides had legitimate points to make before Brexit that have subsequently proved to be largely correct, and that someone who didn't expect that might have changed their view in light of that information, in either direction.
It's perhaps worth remembering that the older generation who voted more in favour of leaving in the Brexit referendum were much the same generation whose younger selves voted to stay in once before. Obviously the nature of what is now the EU had changed a lot in the meantime, and so had the balance of public sentiment within that demographic. It might be surprising if such a large shift had occurred in just a few years now but the basic premise that some people might have changed their minds since voting on Brexit is plausible enough.
I have followed brexit a bit in media and online debates, i have not heard a single good concrete argument for leaving.
For brexit arguments were just empty platitudes about freedom, choice and independence, but when asked about specific law that is issue, or what they would do with new freedom, there was always a silence.
The EU has a democratic deficit. It is a legislative and executive body where those with the most power are selected so indirectly that they have little personal accountability. Many EU Commissioners are career politicians who have become unpopular in their home state and have been given the job as a golden ticket.
The EU is systemically flawed as a financial arrangement. It has a currency union but only limited tax coordination and this will inevitably lead to internal conflicts during times of economic pressure such as the Greek situation.
The EU is a protectionist trade bloc. In the short term, this means membership is good for free trade within the bloc but bad for trade across its border. An example is that there is fresh produce we can source from either EU or African suppliers but the latter are artificially expensive if we have to impose the common tariffs, which reduces competition and so harms our consumers. The UK has been increasing its international trade for a long time but the EU has represented a decreasing proportion of that trade as a long term trend even with the bias that membership creates, so remaining in the bloc is the wrong side of the line to be on in the long term.
The EU does not have a good track record of negotiating international deals on behalf of its members. It has so far failed to establish comprehensive FTAs with many of the largest economies outside its own members and while its size is an advantage in negotiations, it also has to reconcile the sometimes contradictory interests of its many members, which can cause problems as illustrated by the CETA process.
The EU is bureaucratic and slow, and its philosophy of trying to unify everything creates many bad regulations and interferes with free market economics in ways that can be detrimental to members. Its handling of VAT and many digital/technology issues are recurring examples where it may do more harm than good to some member states or their people or businesses.
The EU has an expansionist agenda whether openly acknowledged or not. It has seen considerable scope creep since the last popular vote to stay in and it has a track record of trying to bypass popular consent or seeking that consent repeatedly until it gets the answer it wants, so not leaving now also leaves us committed to an uncertain future.
However and especially since UK has... sorry had a lot of power in EU, why not work towards reforming those issues?
> The EU is a protectionist trade bloc.
Thats a pro not a con, EU protects internal markets from external ones. Overall its better for stability of the overall economy, sure you will find few outliers like cheaper fish example.
Anyhow, all of those examples are only going to be amplified for UK, as a single country. Its much easier to bully lone country as UK than whole EU block.
> I heard quite a few. Again I stress that I am not taking sides here or saying I fully agree with every point, just giving some examples of reasonable arguments for balance since arguments the other way have been widely discussed anyway.
I hate when this has to be done to avoid downvotes :/
Anyhow sadly those are the best arguments I heard for brexit. Though I dont think they are even close to justify all the shit brexit caused.
Thanks for you input.
fwiw I don’t claim the Lisbon Treaty is actually responsible (there are many variables like increasing house prices) but that is the issue, there are no concrete or tangible arguments from either side, that is why leave won.
But I wonder why they would feel ignored and marginalised, they must all just be mediocre and afraid of competition.
Much like how criticism of Darwinian evolution doesn't automatically support arguments in favour of creationism, let alone "prove" it - neither does (quite legitimate!) criticism of the EU automatically make a case for leaving the EU. My impression is that those newspapers were basically making that argument: "the EU sucks, we should leave" - it was never "the EU sucks, let's make it better".
> It's perhaps worth remembering that the older generation who voted more in favour of leaving in the Brexit referendum were much the same generation whose younger selves voted to stay in once before.
Indeed, and this does perplex me - but again, consider that the arguments for Leave were nothing like the arguments for not joining the EU back in 1973. Also, don't forget the public's near limitless capacity for political amnesia.
I agree that political amnesia is a strange phenomenon. On this kind of issue, that can shift the balance of popular opinion either way over time.
Maybe if they've suffered a head injury. Brexit is going badly by any metric.
And the point visa makes it pretty much trivial for well paid engineers to get a work visa in the UK. Where it makes it difficult is for low wage, low skill labour, which will create shortages, but I think that’s by design, whether you think it’s a good idea or not.
I don’t think that tariffs would affect CPU much either, I understand it is mostly cars or agricultural products that are deeply affected. Not the least because you can see that the EU is importing most of its CPUs right now, doesn’t seem to be much of a barrier.
I wouldn’t bet too much on the demographics helping remain in the long term. By conformism or risk aversion mostly there tends to always be a large mass behind the statu quo (which is why brexit winning was surprising). I think that will play both ways.
It's not that simple. Well-paid engineers often have families (spouse/partner, children), and hurdles to bringing in family mean I've seen well-paid engineers come to the UK in recent years, have the visas for their family refused, and so they have to leave.
I'm British but I work here in the US because I literally get paid multiples of what I'd make in the UK doing the exact same work.
Welsh I suspect too with a name like Dai!
Plot-twist: it'll be Scotland vetoing England's application to join.
The Netherlands was too greedy for Natura 2000 subsidies and now we can't build houses, need to shutdown farms etc because we would exceede Nitrogen levels.
I also doubt a fab the size of Intel's would be feasible in the current climate(!).
The root cause there is that we had 20 years or so to get nitrogen (technically nitrogen oxides and ammonia) emissions under control, but instead of actually fixing it, the government tried all kind of paper tricks to make it seem as if less nitrogen was emitted. The courts finally shut that down in 2019, so now it's become an urgent problem.
[1] https://www.cityam.com/london-named-europes-best-startup-eco...
https://www.privateequitywire.co.uk/2021/08/25/305322/uk-bas...
UPD: some people seem to get offended so much when it comes to sheer numbers instead of a matter of opinions
The continent has actually very rapidly caught up in terms of share of money raised over recent years. In 2020, VC funding in the UK only grew by 1.7% compared to 70% in Ireland, 25% in France, 11% in Germany, Scandinavia and so on. European share of the market is actually very quickly accelerating
https://pitchbook.com/news/articles/hot-or-not-where-europea...
https://news.crunchbase.com/news/european-vc-funding-h1-2021...
growing high from significantly lower numbers always looks better in terms of % increase
But as "single most" - fair enough.
Yes, there continue to be lots of funding deals in London. That's something that neither supports nor contradicts your initial point that "VCs came to the opposite conclusion" – all it tells us is that the UK remains competitive regardless of Brexit.
I wouldn't be surprised that if the trend continue, Europeans will work even more for UK startup than they did before (i'm really tempted, i wanted to work for companies in East NA and be based in the caraibean, but Spain is at least as interesting place to live (and way cheaper) and UK salaries are very competitive, especially when considering paid leave)
When a bunch of trading barriers appear, cutting off players from participation in a market, startup opportunities will abound - that’s not surprising.
Similarly, an epidemic of window-smashing might see record VC investment in window repair startups - that hardly refutes the broken window fallacy. The signal that is ‘increased investment activity’ doesn’t necessarily point to economic health.
For some businesses the new trade situation is not bad, for some it is but you can't really argue that thanks to the increased red tape in trade and human resources companies are choosing UK to invest in certain industries that UK has been traditionally a powerhouse.
There's no benefit for businesses when you artificially limit the talent pool and increase bureaucracy for hiring people. There's also no benefit in introduction of border checks in trade.
Well, maybe it can be argued that thanks to the government being the first step in HR, British companies can overwork and underpay their foreign hires just like it's done in the USA thanks to the H-2B visa making the workers afraid of losing their job. However, if you are going to argue that thanks to the new visa rules UK companies are able to practically enslave their previously free workers, better show some numbers. I don't think that thanks to Brexit companies can now pay less to their EU workers who are afraid to lose their visa sponsorship. Even if UK companies are able to force EU employees to less pay and more work, it's very early to show up in any way because EU citizens had the chance to preserve their rights up until less than a year ago.
Just don't present it like as if it is "thanks to Brexit". Brexit made things harder but it didn't kill it for everyone, except maybe for Intel.
That really depends on what definition you personally choose for "decisive", "develop", and "prosper".
The EU is by far the largest trading partner of the UK[¹]. It's unreasonable to presume that a nation can improve their current state once they choose to introduce bureaucratic hurdles, delays, and additional cost on any dealings with their largest trading partner.
[1] https://en.wikipedia.org/wiki/List_of_the_largest_trading_pa...
I can definitely tell you (anecdotally, first-hand) that Brexit hasn't offered any benefits so far, but has made several other activities far more painful that they were before. Not enough to kill a business, but absolutely certainly the sort of thing that will cause some businesses that were previously viable to no longer be so – or to shift resources out of the UK and into the EU.
plus
looking in [1] at Total United Kingdom, 2018 --> $2.74 billion
vs
"The industry's annual semiconductor sales revenue has since grown to over $481 billion, as of 2018" [2]
So all in all, value lost in this limited context (of 3 discussed industries) due to Brexit. (granted, two are global numbers (call it 'potential') and one is a purely UK number (of which you're guaranteed 100%)
[0]: https://en.wikipedia.org/wiki/Film_industry [1]: https://stats.oecd.org/Index.aspx?DataSetCode=VC_INVEST# [2]: https://en.wikipedia.org/wiki/Semiconductor_industry
edit: i don't know how to read --> 274 billion to 2.74 billion, drop ratio in text.
also, you're missing the point that whilst filming/entertainment on its own might be producing lower yield than a semiconductor producer's yield, it employs many more surrounding industries with their own revenue yield that is not included into total numbers.
Intel revenue 2020: 77.87 billion [1]
Now, granted, just because intel has a plant in the UK doesn't move all that revenue over to the UK all of a sudden, they have 8 fab plants [3], so each fab plant comes in at just under 10 billion USD (assuming they're all equal (and equal contributors to revenue), which i don't know and wouldn't expect to be), some countries have more than one fab plant too.
but, we'll also filter to the film industry in the UK, we'll even take the best year, giving us 4 billion GBP in 2004 [2]
(keep in mind GBP and USD here, and VEEEERY rough mathematics and assumptions)
So even on the best day - your ENTIRE (maybe even both, i can't even be bothered to calculate) cited industry/industries in the UK is smaller in revenue than one fab plant that you missed out on.
[1]: https://en.wikipedia.org/wiki/Intel [2]: https://www.statista.com/statistics/297182/film-industry-rev... [3]: https://www.intel.com/content/www/us/en/support/articles/000...
edit: minor fixes
Entertainment employs these from engineering side too, in addition to the industries that specialise solely on art, fashion, and event management - these entities are not included in your comparison of total revenues. For instance, nobody buys tourist tickets and books hotels to go to see a new chip from an Intel factory. Thousands of people from abroad do it to visit filming- and entertainment- related events such as red carpets and conventions. These are also the events where celebrities spend money and donate to popular causes.
Here, i'll do the same (with the same hand waviness):
Your list states people in the "industries that specialise solely on art, fashion, and event management" - Intel's supply chain supports thousands of logistics jobs (pilots, truck/HGV drivers, mining raw materials) - the film industry does not have this at scale.
My point is, you have moved from "intel doesn't want to be here - but these two industries do! so intel must be wrong"
to saying that even though the net loss to the UK is larger in terms of the pure industry, that their surrounding industries bring in money (but apparently intel's doesn't compare to film industry awards ceremonies, which are HUGE MONEY)
This is not the argument I wanted to make, but here: the chip industry enables the video game industry, which on it's own is larger than the movie industry. If you want to compare surrounding industries, there, I'm Done. [1]
[1]: https://www.statista.com/topics/1763/gaming-in-the-united-ki...
exactly, even if you don't like it. I'm pointing at the opportunities that are being created regardless of any single entity's presence in the region, that you are not including into your original comparison. Other big profitable industries find the UK appealing for large long-term investments. You argue that there's "value lost in this limited context", I argue that the context is wrong and there's a bigger picture where Intel's current hesitation to establish a plant in the UK due to Brexit ramifications is irrelevant. It's irrelevant because Intel is a single player that will not necessarily hold its leadership in the next 10 years, whereas big industries such as Entertainment and Construction have already chosen and commited to their choice by making transactions and building the stuff in the UK, that is many independent companies that form those industries have made this decision and Brexit was not a decisive factor to them. And if it wasn't a decisive factor, then there should be other more important factors that make the UK more appealing to each and every one of them.
> > This is not the argument I wanted to make, but here: the chip industry enables the video game industry, which on it's own is larger than the movie industry. If you want to compare surrounding industries, there, I'm Done.
Intel is not the entire chip industry, thankfully.