Uncle Sam shouldn't own Intel stock
wsj.com
wsj.com
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.
If Trump or someone similar is in the office I'd expect that there would be demands that the chips stay in the US to protect the country from Chinese aggression unless there is some kind of bribe.
None of this was ever being done because there an expectation that chips were going to be exported to Taiwan in the middle of a conflict.
Yes, like every other security partner, Trump's immature and inconsistence isolationism makes things worse and unstable. But it was hardly the case that intervention would have be 100% assured under any other President, and it's not the case that that its at 0% under Trump. Improving the odds of intervention, slightly, regardless of who is in office, benefits Taiwan.
Moreover, Putin didn't attack US forces when he invaded Ukraine. There is a significant chance that the PRC would launch a Pearl Harbor style attack on the US and Japan at the outset of a campaign against Taiwan. That dramatically increases the odds of the US being involved in the conflict over the long term. Sure, it's also likely (probably more likely) that the PRC might try more limited form of coercion instead, but one ought to be prepare for the range of possible options.
It is worth observing that one of the major reasons why US conservative China hawks give for not wanting to support Ukraine is because it's not a vital US interest, and they want to focus on preparing for war with China and hopefully deterring it.
It is really unclear you should say why that the Ukraine is being treated "poorly", it is being treated how you'd expect an more isolationist administration who thinks it is a strategic distraction would treat it. The current US administration may well be wrong about this--there's definitely a case to be made that further increasing the cost to Putin for aggression increases deterrence in Asia. But the current administration was very clear in the election about how they felt about Ukraine, and they won.
The argument that unless Trump treats Ukraine "not poorly" no one, anywhere, ever, ought to anything to bend the curve to increase the odds the the US intervening on their behalf seems rather sentimental and unpragmatic.
It seems likely that Taiwan leaders have a better grasp than you do of the strategic choices they are making, and that random feelings about how "poorly Ukraine has been treated" don't enter into it.
If you just hate Trump, it would be easier and more direct to say that, rather than seeming to claim that other people in the world are acting irrationally.
I laughed a bit.
How long would it be until their entire fleet is sunk? 2 days? A week?
How long after that should the Three Gorges Dam be allowed to exist?
As I recall Ford did not take a bailout in 2009.
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.
Milton Friedman when asked about combating greed.
> Greed: a selfish and excessive desire for more of something (such as money) than is needed
This definition is quite easy to distinguish ordinary desire from greed. Otherwise you need to render selfish and excessive banal and meaningless as well.
They did not need doctors, daycare, helmets, cars (they sat 5+ to a motorcycle), air conditioning, avocados, bedrooms, computers, etc.
The human emotion that drives free market capitalism optimally isn't greed, it's competition.
People compete to produce better goods at a lower price to win acclaim and profit.
Greedy people mess that all up by amassing wealth and then using that wealth to change the rules of the game so that they can amass more wealth.
It's like you're arguing that overeating isn't how you gain weight, it's just having an unbalanced caloric ratio.
If it just weren’t for that darn greed and profiteering that the Chicago school endorses.
- Communism is awesome!
- What about countries X, Y, and Z?
- Oh, that wasn't "real" communism!
Most imagine post-scarcity will be awesome. While one can never know for sure, for all intents and purposes, the first point is also true. To the best of our knowledge, achieving post-scarcity will be awesome. It is why everyone, even (and in particular!) the USA, is striving to get there someday.
Communism imagines that statehood will come to end, so "countries", in the context of communism, doesn't make sense. It is likely confusing "communism" with "Communist Party".
At what point do you decide that's an inevitable outcome, rather than an unfortunate unexpected outcome that happens every single time?
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.
https://en.wikipedia.org/wiki/Heavy_Press_Program
A lot of USA investment in industry falls under defense spending. Canada doesn't spend nearly as much on defense, so has to be creative on how to cultivate domestic industry.
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.
We nationalised passenger rail in the 60s.
> could not generate sufficient revenue to pay back the loans
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.
> a few billion bucks ... I would also spend it,
You as a company? Sure, you can spend a few billion.
What does this have to do with the comment I responded to? Who knows[0]
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.
No one will give Intel real money for the advanced fabs, as they are worthless right now. I suspect that's probably the main thing holding Intel back from doing that - they can't get a decent price on the fabs, and just spinning them out directly would probably lead to a fairly immediate failure without Intel's CPU design division funding development without immediate expectation of returns.
If one was a gambling man (with a good helping of pride), you keep the fabs with Intel (where the CPU design division is printing money) and subsidise the fabs and hope they finally stick the landing and start making half-decent chips again.
If they split, it's likely the fab side of the business will need a large infusion of cash in order to catch up (be it in the form of a government bailout or something else), or then they have to accept becoming a second-rate player. For which there is still a large market, so they might actually do decent-ish there. But that pretty much leaves TSMC in a monopoly position.
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.
Major news nevertheless.
Yes I know that this is the slippery slope but it also accurately describes the trajectory of politics in America at basically every step
“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.
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.
Having to do any kind of 2025 type of work on it would be testing my patience to the extremes because all SW and media has grown in size and/or complexity(AV1 encoding, etc) requiring faster CPU, GPU, storage and RAM for the optimum experience. The only things that run fast on it are period accurate Linux 2.6 and Windows XP with websites form 2008, but I wouldn't call that modern computing.
Computers have gotten night and day faster and especially more efficient since 2008, pretending otherwise would be in bad faith.
https://www.youtube.com/watch?v=m7PVZixO35c
New computers aren't as much faster as benchmarks would lead you to believe. If your code relies on unpredictable branches, dependept memory accesses in a tight loop, or very tight feedback loops inside computations, new CPUs won't have that much of an edge.
Has it ever worked?
Long term? No. But what Westerner cares about long term?
The random acquisitions and board leadership didn't help intel but r&d had plenty of money poured in
OTOH, if TSMC makes a couple bad bets in a row, all their 500 clients will be in deep trouble.
The current lowest speced Mac can absolutely dominate my previous 2012 2x20c ivy bridge era Xeon tower. And on top of that, the power and heat are drastically less with the new machine.
The only reason a system of this era even kept up is the years Intel just didn’t do anything that was that much better and because of ram and pci express expansion which allowed for upgraded faster storage and faster gpus.
These days I can get better performance in a system that I can hold in my palm (Apple m4, amd ryzen ai 9) that doesn’t produce enough heat to keep my entire room toasty in the winter.
How do you know it?
Itanium was a flop from bad business decisions IIRC. Note too that x86-64 was developed by AMD, and Intel licensed it from them.
1. IBM picked the 8088 for the PC platform. This was part luck, part Motorola being too slow to market with the 68k.
2. The first PC with an 80386 was made by Compaq, not IBM.
3. A big part of what held OS/2 1.x back was IBM insisting on it working with the 80286, which made properly supporting DOS programs challenging. OS/2 2.0 came out 6 years after the first 386 based machine from Compaq.
Also Texas didn’t have a second source for the TMS9900.
We definitely live in the worst possible timeline.
Itanium was a flop from a technical standpoint but not from a business one. Intel spent roughly a gigabuck and effectively scared every competitor out the pool except for IBM and AMD.
Intel is suffering because their old fab folks all retired, and no young, smart engineer over the last 20 years wanted to work for any semiconductor company let alone Intel.
Even without the Itanium, the economies of scale in the x86(-64) world would have driven the RISC vendors out of the game.
The false information about the future of Itanium scared almost all of them to surrender, about in the same way as the fictional Strategic Defense Initiative had scared the Russians.
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.
So in effect, unless the next administration runs on punishing these abuses and actually follows through, may as well be legal.
(Now they can meet their end by footshoots like removing the turn signal and drive select stalks)
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.
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.
From a national security point it really, really isn't. Like, I'm not a fan of the Trump administration, but having basically all chip manufacturing in Asia is not a good idea if you think there'll be a war with China in the next few decades.
It is extremely relevant to this conversation. Regardless of whether you think China engages in a war with Taiwan, it is a crucial resource the US will want developed locally (similar to any critical resource like farming, steel, or rare earth metals).
CHIPs seemed more well thought out than simply taking control of 10% of Intel.
I see this a lot, but I’m not smart enough to understand it.
The US still has immense military power. Is the suggestion China/Asian is going to make the US so desperate for lack of chips that they use this power? Whether the manufacturing plants exist in Texas or Taiwan, the US military basically ensures they exist. And if that supply is cut off and that is forecasted to be the turning point of a war, then with a figurative push of a button, the US military makes sure that other countries also don’t have chip manufacturers (i.e. blows them up). Similarly, other countries can target plants on US soil if war breaks out anyways. I don’t see a war coming to that point or to the US losing access to chip manufacturing because of one. What don’t I understand from this angle?
That said, I do think it’s important for the US to have their own chip manufacturing on shore. Not as some protective measure over some combat war, but (1) to ensure less possible influence from foreign governments and decrease likelihood of possible backdoors or intentional sabotage and (2) to protect against other factors from shutting down the facilities, like natural disasters.
The options available to the US are: attack the PRC to blow up the chip manufacturers and probably start WW3, or frantically try to replicate the capabilities of the Taiwanese fabs before the PRC decides to cut the US off.
In the meantime, the PRC will have immense leverage over the rest of the world, and there is no scenario where they don't extract as much as they can from that advantage.
Do you realistically see that happening? Why would the US allow that to happen when they are so reliant on it not?
https://en.m.wikipedia.org/wiki/Taiwan%E2%80%93United_States...
As to why the US would allow it to happen, the PRC could take steps that would make the defense of Taiwan politically undesirable to the US (threatening biological warfare is one example that comes to mind).
And yet they continue to just posture instead of doing it.
The US does maintain a small military presence in Taiwan already. Answer me this: if the US is so heavily dependent on Taiwan _not_ being part of China, then why would they let them take it?
US bringing chip manufacturing in country weakens Taiwan’s position and only then will China take it, when it feels safe from retaliation from the US.
They maintain a small military presence? Not really, there are no bases and last report in March was 500 US military trainers. I would not really classify that as a military presence.
If China wanted to take Taiwan today? Honestly not sure what would happen. Maybe the US intervenes, maybe not. I am not even sure how I feel about either side. What I do feel strongly about is that it’s best both for the world and the US to reduce chip concentration from Taiwan. I believe in comparative advantage but also believe sometimes it’s useful to guide the invisible hand when there are crucial industries. I don’t even know how I feel about China. They have done amazing things in lifting their country, especially when compared to close neighbors like India but also I never can get a good feeling for their intentions as they play a much longer game than most of the West.
War with an actor like China would not be pretty. Their country has seen no real conflict so there is question about battle readiness but missles and drones don’t need much training and I personally don’t want to test it. So while yes I don’t think China is making a move today, I also believe it’s a highly complicated problem for its concentration risk, maybe they make a move tomorrow and the world is reliant on China for chip manufacturing.
There is a 0.00% chance that the US does not intervene. That’s why we have a small presence there and a large presence in Japan. And that’s why China has not yet taken Taiwan.
The chinese just this week shut down the entire US auto industry because of rare earth if they blockade taiwan how long until they win that.
This is just incorrect. It has not “been proven over and over in the past few years”.
If the only source of high quantity and high quality chips is located in your competitor's backyard, and they spent several decades repeating how it's their wayward province that they fully intend to reclaim one way or another, it's pure stupidity to sit around and do nothing.
Let's not pretend that the money would be spent on basic research instead, by the way. US pumping some money into chip production is a rare spark of intelligence amidst an avalanche of stupidity and grift.
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?
If HP, or Nvidia, or Sun, or Motorola wanted the bag maybe they should've tried building their own modern fabs.
Has TI ever made anything nearly as complex as CPUs? Has NVIDIA? (Hint: the answer is "no"). Intel is pretty much the only option, though ChatGPT suggests GlobalFoundries as a potential other option (spun out of AMD).
I don't have a problem with a US government owning a stake in Intel given its massive strategic importance, but I have a problem with this government owning a stake in Intel given its brazen corruption.
Government should own a stake in every business, and citizens should then get shares in that government fund.
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 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.
Even 10 years ago Intel was a blue chip stock, saying they should have cannibalized their lead to go into a lower margin market for volume would have gotten you kicked off any executive role.
Imagine being in a boardroom in 2010:
- You're printing money with 60%+ gross margins
- You have a 2-3 year process lead over everyone
- Your R&D budget dwarfs competitors because of your integrated model
- PC sales are still growing and servers are booming with cloud build-outs
- Also you are betting that Apple is going all in on your foundry to drive the volume and R&D
How they fiddled and watched Apple take the phones that make a profit; Samsung/Qualcomm provide chips to the rest; and all the hyperscalers make their own arm chips in the data center while doing nothing. Absolutely nothing. Is beyond comprehension.
Meanwhile, (I think Asianometry?) pointed out that Intel's headcount was recently as large as AMD, nVidia, and TSMC combined.
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.
Right, but it's an absurd juxtaposition when taken at face value none the less. I agree with what you said, but my point was more about other possible structures for the deal rather than political conclusions. I was attempting to brush aside the political considerations and take a somewhat tabula rasa approach, not spur a partisan political conversation, which clearly I failed at by mentioning the absurdity in messaging.
Perhaps I should have nixed the political aside at the top. Wasn't my intent to bring that to HN.
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...
> if your company is profitable post expansion funding then you will profit share with the federal government.
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.
I wish that were so.
It's also just crazy to see nationalization being packaged as capitalism. Those screaming for privatization while nationalizing. It's not even being done covertly either
* You can't just spin up leading edge semiconductor manufacturing on a dime. It takes decades and hundreds of billions to reach where companies like Intel and TSMC are now. It's so hard that it's essentially impossible for new entrants to catch up.
* The US has a strong interest in having local manufacturing, that no other power could take away in a time where it's needed.
>a lot of those companies are currently fabless, but how many would change that with equipment bought at a fraction of the cost?
Zero. Dumping the fabs on them would not help them. They're expensive and complicated to run. They don't have the knowledge to run the fab side of design (it's a joint effort on both sides to design a chip), nor the money or knowledge to improve those fabs and keep them up with the leading edge.
You can if intel goes bankrupt. Why do people act like a bankruptcy consists of taking all the employees out back and putting them down then setting all the buildings on fire.
(Not that Intel's has been working particularly well, as of late)
Intel is strategically important. As nice as it is to pretend that the whole world plays by the same rules, that the free market exists everywhere and that we'll never to to war, there are bad actors and the US (rest of the collective West as well) need to ensure that we won't be completely crippled if China attacks a single island off their coast...
That and when most governments "nationalise" corporations they seize them and don't give the owners/shareholders anything.
And it's the standard refrain: if this money helps Intel get back on its feet, the stock price will go up, presumably to the point dilution won't matter.
But who cares, really? If it's true that Intel is actually strategically important to the US, the shareholders are irrelevant if need be. It's not a great outcome, sure, but Intel has been mismanaged for a long time, and investors should have known the risks of investing in a company like that.
Versus in most nationalisation events their shares simply get taken away or diluted to pennies.
https://www.intc.com/news-events/press-releases/detail/1748/...
First you get the money, then you get the power.
Money is fungible, but power isn't. Arguably, taking away my power is an affront to my human rights. Taking my money is an affront, but it never was my money to begin with, as I don't control the value or creation of it. My rights are inalienable.
Fab capability on US soil is strategically important. Intel is one of many possible routes to that.
Why would a company support two different chip designs, for the luxury of deployment on an inferior technology platform, coupled to a troubled company that has a history of not being able to keep up or consistently deliver the latest process tech? It's a substantial, long-term investment that has wide reaching implications on the performance of your own products you are building. Who pays for that and sets up their company for failure like that?
If you build on Intel, you are making a decision that exempts you from competing in the top of market for your products. Your designs will run hotter, consume more energy, have less yield, and lower clock. The design will be more complex and costly and have very little shared between other vendors. You'll need to maintain and inventory two different BOMs for a critical component, and you'll likely have subtle hardware differences or completely missing features that will require further software customization, creating even more complexity and headache to delivering a modern tech product. Hardware designs are hard enough as it is and companies don't have infinite resources or capacity. And don't count on Intel taking the lead from one of the others, giving your product a boost -- anticipate them further falling behind, or lagging behind at best.
Like always, the government doesn't understand any of this and the outcome of this latest missive is going to be completely predictable.
Most of semiconductor production is not on the leading edge. Most big SoC production is not even on the leading edge. There's a lot of room for older fabs. And the customer can demand a lower price as a result of lower yield and performance.
> You'll need to maintain and inventory two different BOMs for a critical component
Most of this stuff that is not on the leading edge doesn't have a "leading edge variant".
Of course, I wouldn't build on Intel for other reasons: they've been terrible as a foundry and they have been changing directions seemingly weekly. That is the hurdle that you can't get over: you can't rely upon them as a partner.
It's capitalism when you're winning, and socialism if you're losing.
Or: "Privatised profits, socialised losses".
I understand why in this case, Intel is very much in bed with the US Government and likely makes a strong case for being a national security interest, but it feels icky.. especially as AMD is an American company too.
If the issue is the node fabrication then why wasn't their an investment in Fabs before now? Intel got its big start on government grants iirc.
Not sure where I read that (I think it was some dude's Tweet), but it seems relevant here.
Left: Capitalism isn't always perfect, sometimes social policies make a better society.
Right: Capitalism is always perfect, socialism is evil even in the smallest amounts.
for some of the big giant corporations.
I mean, they are critical to the functioning of society after all, right?
The free market is dead in many industries.
Long live capitalism.
Please think of the poor, poor shareholders.
If they pass that hurdle, its more like 70/30 Dump says put backdoors into all processors, and says it loud and proud. Assuming intel is smart enough to be able to fuse that functionality out entirely (not that anyone would believe they disabled the functionality)... That leaves somewhere about 15% chance that Intel survives 5 more years
It's been done many times in the past decades from financial institutions, manufacturing, others and in different ways.
Remember Harley-Davidson and tarifs on imported motorcycles?
I think the real question becomes how will get done and for how long.
Seems like a bad combination to me, a net positive tax payer.
Everyone benefits from more medicine, weapons, food, etc.
>> Everyone benefits from more medicine, weapons, food, etc.
Seems awfully… communist?
Nvidia/AMD offer 15% profits
Intel offers 10% share
I think, as a TV star, Trump enjoys all the circus. And everyone else is playing along so it's fun.
Covered yesterday on YC.[1]
The chip fab industry builds billion dollar bespoke superfund sites, and they're paid for the privilege.
https://www.jstor.org/stable/j.ctv65swcp.5 | https://doi.org/10.2307/j.ctv65swcp.5
The US government doesn't need leverage. It just needs an act of Congress. Corporations are convenient fictions that exist at the pleasure of our legal system, which can be changed.
https://en.wikipedia.org/wiki/State-owned_enterprises_of_the...
US federal government is the biggest player in healthcare, by far. 32% of all healthcare spending is Federal government dollars. They have plenty of leverage. Bad if they use it, but they have it.
$900+ billion in Medicare yearly $600+ billion in Medicaid yearly
What would the value add for either party be?
Now only companies are left to pick up the bill, because a republican administration won't ever consider doing it.
I still wonder when CEOs will realize that lack of education and lack of healthcare will eventually land at their doorsteps because they won't have immigrant workforces anymore that can compensate for it.
As a high-income earner I used to be in favor of privatizing healthcare here in Italy/Europe.
I've always seen the public healthcare system wasteful and inefficient. Our healthcare system really is in a terrible spot.
Then few years ago, a very close friend of mine, had to give birth to her child. She had chosen one of the most expensive hospitals in the region, where there would be a huge staff all for her, not that crappy public service she would get.
Then tragedy struck: in all the luxury and care she was receiving, her newborn had huge problems staying alive, and died of respiratory issues few minutes after birth.
A very preventable death the autopsy stated moreover if she was in an appropriate public hospital.
Why? Because larger public hospitals have all a newborn reanimation unit with trained staff exactly for these kind of emergencies. Private ones? They are virtually non existent, doesn't matter the country or budget, no private hospital can afford such an expensive unit that requires extremely specific training and equipment but gets to act rarely if ever. So they don't exist in those contextes.
Since then I realized how naive I was: private healthcare just cannot justify investing in a huge amount of treatments that are a financial disaster for the private clinic/hospital. They just can't.
Thus, at the end of the day, you don't really want private healthcare that has to choose what to provide on a $ basis, you just don't. You want a as comprehensive and available public service that needs the right amount of money and incentives to work properly.
I don't know how can it be achieved, but you really don't want to be that father/mother, sister, friend or patient that cannot access an important procedure because it makes no financial sense to offer it.
Have you considered that they don't care? They can make a better profit now, so why worry about what is happening 5 to 10 years down the line?
If you say 'I like Capitalism', a significant minority will hear 'I love US imperialism and hate nature', despite that almost certainly not being what you meant. Similarly, if you say 'I like Communism', many hear 'I love dictators, gulags, 5 year plans and famine'.
A word of advice: if you actually want to have valuable political conversations with people, don't start by identifying yourself with ideology that's arguably responsible for various atrocities and millions of deaths.
So neither capitalism nor communism? What's left, anarchism? I guess they haven't killed that many people.
> Covered yesterday on YC.[1]
> [1] https://news.ycombinator.com/item?id=44989773
The post from yesterday was news; this is commentary, as in, not a dupe.
To your point, it's arguably closer to state capitalism, which may be a distinction without a difference if you paint it with the same brush as socialism, but it's one worth mentioning.
https://en.wikipedia.org/wiki/State_capitalism
The name of the (sub)site we're posting on is HN; YC is the host. :P
Eventually those were privatized. Now, the railroads are being socialized again.
China is trying to beat US at its own game. US (or at least its current political leader) is trying to beat Russia at its own game. Russia is trying to remain relevant. Russia is the muscle, China is the finance.
China needs Russia just like Google (Chrome) needs Firefox. Without Russia around, China would get all of the attention instead. Without Firefox existing, Google would have no counter to antitrust allegations in the web browser space.
Anything you can do, I can do better. I can do anything better than you.
No, not like that!
It's like that Spider-Man meme where everyone is Spider-Man pointing their fingers at each other. All the power structures are mirroring each other. It's all kayfabe, all the time. Everything is wrestling.
https://www.nytimes.com/2016/05/27/magazine/is-everything-wr... | https://archive.is/muwUp
Chinese large scale investments are a bit different. It’s not just SMIC who gets a lot of funding, but others as well, so they can still compete with each other, until the winner is chosen and the others fade away. Similar to what is happening in EV market in China.
Intel… there is a decent chance that company fails even after this investment. They basically need to force other companies to use Intel chips instead of competitors for them to be viable at some point.
But you also have to consider whether the government has the legal authority to make the investment. For a country claiming a limited government and the rule of law, that is a serious consideration.
You seem to be focused on the first consideration, but do not overlook the second one.
I'll be blunt - I don't think anyone takes either of those seriously, not since Wickard v. Filburn in 1942.
GeekyBear gives a less blunt similar argument: https://news.ycombinator.com/item?id=45008439
The state should get equity for the money it spent on bailouts (or other purposes).
And this money should be put to work on social programs ;)
E.g., the government made money on the GM bailout.
Aka late stage capitalism.
I can’t wait for the AI bubble to burst, its going to be hilarious.
I'm not in either camp at the moment, as I don't have a deep understanding of Intel or its finances, but I'm tired of people whining about how others could possibly have a different opinion about two similar but different events, separated by nearly two decades, as if this is some sort of "gotcha!" moment. It's not. Move on.
But even if -- let's just say if -- this Intel bailout were identical to the bank bailouts in every way... priors matter! Even someone who agreed with Bush back in 2008 that the bailouts were necessary, someone who was largely in agreement with much of what Bush did during his presidential terms... that person could very much disagree with what Trump has done in the past 7 months (as well as what he did 2017-2021), and that disagreement makes it entirely reasonable to question whether or not this particular move is a good decision. That's just... entirely normal.
If you’re fine with that rap sheet, more power to you. I’d rather our president be old than be an old rapist wannabe dictator criminal who has, literally said on a recording, “grab em by the pussy” in reference to women.
I get why the idea seems sane, you want to get returns on investments, right? But with governments the vehicle for returns is taxes and investments are often called "grants" (but also loans, credits, etc). The tax system means you can make investments and always get some return. FFS you could invest in a company going nowhere and you still recoup through taxes. The only way you lose in this system is by tanking the entire economy. Idk why this is so hard to understand. Why people think things like research grants is akin to tossing money into a pit and burning it.
I know the current party is anti tax but aren't they also anti nationalization (Words, not actions)? Changing (or adding) your returns vehicle to be through stock only creates nationalization. It increases returns but also puts an additional thumb on the scale. It's very short sighted.
Who knew socialism would come to America wrapped in an A̶m̶e̶r̶i̶c̶a̶n̶ capitalism flag?
> workers controlling the means of production
If you make targeted grants, rebates, subsidies, etc, it even seems more fair to make taxing also targeted.
And is giving Intel subsidies and making Intel pay for it more socialist than giving Intel subsidies and making everyone pay for it?
Maybe there are better ways to prop up Intel besides the government taking a stake, but losing Intel would be a huge blow to American manufacturing interests. There's been a failure of strategic vision, both at Intel and in the American government. I think as a short term measure, taking a stake isn't the worst thing the government could do at this time.
Also to go off on a tangent a bit: this is one of the benefits of having a Trump-like character as President; he's clearly not beholden to any ideology and is extremely flexible when it comes to making policy decisions, even when a certain policy might be more at home with the opposing party or side of politics.