The goal of a corporation is to generate value for shareholders, and we don't give any incentives for them to do otherwise.
Intel's last stock buyback was in Q1 2021, which was $2.4B. There were $14B in buybacks in 2020 [0].
Companies execute stock BuyBacks when they don't have better internal Investments, and that's a good thing!
Intel doesn't care about more us-based Fabs, nor are they high yield. This is why the US government has to pay them if the US government wants those things to exist.
This was in fact my intent.
I would just like to highlight there are alternative ways besides grants to encourage Intel to open US based manufacturing. Ultimately it's the tax payer that is funding this grant, so it's important they feel like they are getting a good deal. I think it's also telling that Intel didn't invest the $8.5B themselves when they clearly had the cash just a few years ago.
What are the alternative incentives?
2. Alternatives to giving grants: Tax credits, low interest loans, import duty, law, executive action, threaten anti-trust lawsuit, purchasing shares, leverage intelligence agencies, nationalize. The most straightforward way would be to extend the regulations around exporting critical technologies to make it unfeasible for new chips to be manufactured overseas. There's pros/cons for all choices.
Re 2, it's worth noting that the majority of Chips does come in the form of tax breaks and loans
A multinational needn’t be concerned with the long term prospects of any one country…
Oldest game in the book!
Have you ever seen a consulting company tell a client, “you don’t have to pay us to do your R&D, we have enough money to do it ourselves!!!”
That said, I’m not a fan of pointless acquisitions either…
Would executives actually do buybacks if they didn’t have company shares? I suspect not!
At the same time, a company shouldn’t get to underpay employees, do layoffs, and stock buybacks all in the same year…
That means either issuing more or buying some from the market. Issuing more should upset shareholders and decrease the price as they've been diluted.
Thus I expect a key driver of stock buybacks is balancing the outflow of stock to employees.
*It should be noted that this is true due to the tax code rather than some underlying economic principle. Dividends are taxable whereas reinvesting is a tax deduction.
If they all re-invested all their earnings into growth, wouldn't that mean that every company is growing un-sustainably?
And what is the incentive for investors to fund these companies that never return anything to the investors?
There's surely a middle ground where a company should return _excess_ profits to shareholders when they're doing well. Intel was too busy paying out hundreds of billions to notice that Apple/TSMC/ARM/AMD/NVIDIA were eating their lunch.
If the company leadership can't find a way to get a return on the money, why not take it somewhere else?
Intel investors sell and become Nvidia investors.
It seems like people have the blind assumption RnD investment always has profitable returns and is the limiting factor.
There are real institutional differences and limitations to what money can do.
You can't drop a billion dollars on a turd and come back the next day and collect 2 billion dollars. When a company pays a dividend, it is saying that it can't put that money to better use.
Suppose I own you, my slave. I can work you for ten years, collecting the profits off your labour - or I can sell your kidneys, liver, eyes and heart for a large up-front profit. One approach is long-term sustainable, the other is not.
But looking at it this way entirely disregards your perspective on the situation. Perhaps you would like to have a say in some of the decision making? Perhaps the owner's profits aren't the be-all-end-all of things?
You can pretend to have a billion dollars and show great concern about how to turn it into two. Or you can accept that for 99.999% of people this is an exploitative system that destroys everything of true value, in the end leaving the one biggest capitalist with a giant bag of money and nothing left to buy with it.
If you work for a completely employee owned coop with a profit, would you reinvest it for less money tomorrow?
You can even take money out of it and talk about goods. IF your coop job runs a profit, would you rather get 2 free hams this year, or choose to wait and instead get 1 free ham next year.