I’ll be honest: there is a very good chance this won’t work .... At the same time, the China concerns are real, Intel Foundry needs a guarantee of existence to even court customers, and there really is no coming back from an exit. There won’t be a startup to fill Intel’s place. The U.S. will be completely dependent on foreign companies for the most important products on earth, and while everything may seem fine for the next five, ten, or even fifteen years, the seeds of that failure will eventually sprout, just like those 2007 seeds sprouted for Intel over the last couple of years. The only difference is that the repercussions of this failure will be catastrophic not for the U.S.’s leading semiconductor company, but for the U.S. itself.
Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
If I may add my view as a formerly high-achieving semiconductor worker that Intel would benefit greatly from having right now, a lot of us pivoted to software and machine learning to earn more money. My first 2 years as a software engineer earned me more RSUs than a decade in semiconductors. Semiconductors is not prestigious work in the U.S., despite the strategic importance. By contrast, it is highly respected and relatively well remunerated in the countries doing well in it.
From this lens, the silver lining of the software layoffs going on may be to stem the bleeding of semiconductor workers to the field. If Intel were really smart, they’d be hiring more right now the people they couldn’t get or retain 3-5 years ago
Well, there's a really easy and straightforward explanation for how this happened. It's just uncomfortable for everyone who's succeeded because of it. So they don't say it.
America abandoned free enterprise in favor of managed monopolies. It happened via a wave of financialization, globalization, government bailouts, mergers and consolidation that all granted immediate financial benefits to shareholders, at the cost of long term competitiveness.
That's it that's the whole story in a nutshell, look at Boeing, Intel and others, you'll see it again and again.
This is not the right way and US economics are looking more like Mussolini's every day.
Force these incumbents to compete. With fragments of each other, or with new American companies. Perhaps shelter them from some foreign competition if you really must.
That would once again unlock the unparalleled power of the 350 million enterprising souls spread between the two coasts. Which is what got America to #1 in the first place.
Give those souls something to do again that isn't meth or opiates.
This and everything else. We outsourced manufacturing of almost everything then are surprised when the people doing it for decades are better than we were.
The reason this pivot happened was because of the Pandemic. As soon as the Pandemic hit and China stopped sending us PPE it was a violent slap in the face and an extremely rude awakening that we are completely dependent on China and other countries for basic necessities. India also stopped sending us pharmaceuticals.
This realization means that no matter what, Americans need to make certain basic necessities, and chips are one of them. I have friends at Intel that have been there for 20 years and they basically say it's dead man walking. They have chip equipment that they paid billions for that is sitting idle because they don't have the demand, but they can't turn them off otherwise it will be destroyed. However, these machines cost hundreds of millions to keep on. Plus they are already out of date compared to TSMC. The entire thing is a disaster, but Americans need an American source of chips so they have no choice but to double and triple down on a bad investment and hope that something happens that will let them become competitive again.
> Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
What's annoying about this is that it's the same people who drove the outsourcing and decline of American industry who are using the same framework they've been using to drive that stunning dereliction to argue that this is the wrong approach.
Perhaps then fabs should be considered important enough for the US then that a new entity, perhaps not unlike NASA, is created to create and run these.
I believe something similar is happening in drug development right now. It may take less than 5, 10, 15 years to see the impact to the US. But from someone who has a vantage point to see it across many parts of the industry, including having seen the evolution of Intel / TSMC, I think it is a very similar story. Right now is like 2007 (or maybe even a bit later) for therapeutics. In the future, we will look back on this year as the year we gave it up.
Is it just me or is the author only making an argument for why Intel is too big to fail? He says hes steelmanning the equity stake but then he doesn't argue why it's necessary. He devotes 2 sentences to CLAIMING its necessary after aruging that Intel is too big to fail.
The article is basically like this:
> Leading edge domestic foundry companies are a national security concern. Therefor Intel is too big to fail.
OK. Many can agree with this. And I think the author makes a very good argument for it. He makes some good points:
- Startup cant replace Intel
- US cant rely on TSMC alone
- Artificial demand could actually improve Intel by solving the chicken and egg problem
But that doesn't answer the question, "why the equity stake?" And for more context, it's replacing what would have been grants with the equity stake. So it's, "Why replace the $XB in grants with an equity stake?"
He does touch on it but it's just a claim thrown in at the end:
>The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere. There simply isn’t a credible way to make that promise without having skin in the game, and that is now the case.
OK, maybe. But that now needs to be argued for. The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms.
> over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt?
Over a decade ago Intel wasn't driving itself into the dirt. Their failure was just beginning approximately 1 decade ago, starting with their failure at EUV leaving them trapped on 14nm.
I would like to challenge the notion that you absolutely need state of the art fabs to win a war. Most military gear uses "proven technology" several generations behind SOTA. When push really comes to shove there is a lot you can do with the chips you already have and nationalizing the fabs under your control.
The dependence on oil from the Middle East is comparatively a bigger problem for the West (though not for the US with its shale oil reserves).
>It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
There were a few of us warning about this well before it all happened in 2013 and 2014. Predicted the death of Intel, and surge of AMD and TSMC before majority of people even heard of TSMC.
I also feel a little sad about TSMC, now that they have invested a lot in US but US is actively and strategically trying to pop up Intel to compete. But TSMC is at least 2 cycle ahead, meaning 5 - 6 years time. Unless TSMC make any mistakes even in the best case scenario I dont see Intel catching up within that time frame. Especially now they have little to no cash cow. Server, GPU, Consumer CPU are all under threats.
People have been raising this alarm for decades as more of our domestic manufacturing is off shored. Few listened then. It's unlikely we will come back from this.
Maybe the problem for Intel is complacency exactly because there is this expectation of a bailout when things don't go to plan.
While other hardware companies got lean operationally and employee wise Intel did not. The ex-Intel employees all paint somewhat the same picture of bureaucracy, layers of (poorly managed) dependencies and reliance on paradigms that worked during late 90s / early 2000s.
If you followed sources like semiaccurate the situation at Intel is not surprising either, they've been reporting on issues there since their inception.
That’s Intel management’s FUD building a moat against such startups with the government’s help.
Several billions of dollars is not a scary level of funding these days for such startups to happen. Plus CHIPS pile of hundreds of billions. Plus Nvidia, Google, Amazon, Apple and others can always form a consortium to build a foundry. A lot of options, yet all of them are being killed by the Intel management skillfully working the bronze ear. That is how a tech race is lost - by letting government instead of the market to pick winner.
There's a real folly in capitalist countries thinking they can be self-sufficient walled castles. Capitalism by its nature will seek out the lowest cost be it in labor or manufacturing. That means often means outsourcing.
Our system has no breaks for this. In fact it works actively for this, hence the neolib ideal of "just move towards efficiencies, and let the chips fall where they may." This is ideal under capitalism. As long as we avoid the needed migration to socialism, this is the best we can do.
Neolib economies generally work as much as anything "works" under capitalism. The GDP of the USA, median salary, quality of life, etc was the envy of the world until the recent nationalist movement that's based on "insourcing" and tariffs. You can't go back and capitalism migrates to efficiencies, which means outsourcing. Its more efficient to export factories and keep cushy office/service jobs here and drain the profits from those factories overseas.
Nationalism/protectionism and capitalism are fundamentally incompatible, so here we are. Demagogy and populism and "return to the past" mentalities used to win political power are the actual problem here.
Also what exactly happens if intel goes under? We have to buy 'foreign' licensed ARM? Manufacture in Asia? We're already doing that. And we have AMD which is a good, if not, superior product, regardless of manufacturing locale. We don't need local fabs the same way we don't need local factories for a lot of other things. You can't just depress wages with a wave of a hand nor do tariffs work outside of some really focused edge cases.
>The U.S. will be completely dependent on foreign companies
This is true of nearly all things in nearly all countries. Recent nationalist movements won't change how capitalism works and recent tariffs and protectionism has only hurt these industries and the working class. The toothpaste is out of the tube and it cannot be put back in. What we're seeing with the government buying intel is an attempt to do that, and it will fail. Expect more tomfoolery like this until we get responsible leadership, but until then we all have to sit here and watch these various economic horrors unfold. Be it this, inflation, mindless tariffs, etc. This will fail and its obvious it will, but currently it buys political power, so we will go this route because voters, largely uninformed on how capitalism works, think this is the "one weird trick" that will make them wealthy. It won't. In fact, all recent indicators are more negative as these policies continue. It will instead make them poor.
Intel was the best until fairly recently. Then they still looked like the best to a non-expert observer, and then still looked at least competitive until even more recently. The modern world changes too fast for our governments to adapt to. Especially when we're talking about state of the art semiconductors and our leader was born before the invention of the transistor.
> "The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere."
If the last 8 Months of this year has shown something, it's that every decision the US takes could be considerate, but as likely also completely random and reversed and bent at any moment in the future.
Accepting those risks in order to sell in the US-market (assuming it would be required) requires that the US-market also provides the commercial rewards.
For now I don't see that this is secured in sufficient volume to justify such an investment, considering that it will take YEARS for Intel to actually become a viable foundry and have a customer product ready to be produced there. And I'm not even talking about the potential cost-increase vs. an established high-volume foundry...
> every decision the US takes could be considerate, but as likely also completely random and reversed and bent at any moment in the future.
This my main problem with this investment. I can certainly appreciate the benefit of US government investment to ensure "homegrown" production capabilities. However, this depends a lot on a level of understanding, intelligence, and planning from the US federal government which is monumentally lacking. If no one trusts Intel now, I cannot begin to imagine how anyone would view Intel plus the current US government as more trustworthy.
Just look at the current approach to tariffs as a good example for how current "industrial policy" is being carried out. Unpredictable, vengeful, and declared with little plan or forethought. Why should we expect any differently from other policies?
The other day when the US's stake in Intel was announced, people assumed it was a political stunt. I suspected it was because of national security interests. The CHIPS act probably didn't get the result US Defense wanted quickly enough. Some details that were glossed over include that there was a chip shortage a few years ago as a result of COVID and TSMC supply chain disruptions that led to a shortage in electronics and automobiles even. This started to look like a national security interest back then.
Second, there is an AI race going on. US intelligence is taking it very seriously and views supremacy of our AI as very important. Recently, the US was pushing NVDA to start using Intel's foundry. I assume it's for national security reasons.
Finally, a couple of details from the Intel deal that were not widely discussed is that the US is taking a passive seat[1]
The government’s investment in Intel will be a passive ownership, with no Board representation or other governance or information rights. The government also agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions.
There are also warrants being given whose status is based on Intel's foundry. That suggests the foundry was the interest all along.
> The CHIPS act probably didn't get the result US Defense wanted quickly enough.
It might have helped if they actually distributed the authorized funds. CHIPS act was passed just over 3 years ago now, and Intel never received their grant money (which has now turned into the cash for equity deal of dubious legality).
> Recently, the US was pushing NVDA to start using Intel's foundry. I assume it's for national security reasons.
The real reason is simple, if you've been following IFS: Intel's foundry has no large customers. The free market has spoken and almost every single customer prefers TSMC or Samsung silicon. America was boxed-out of serious world-class chip manufacturing ever since Intel swerved on EULV. If it was for natsec reasons then I doubt the fed would waste their time taking a passive seat when they could claim Intel as eminent domain.
It's not about national security whatsoever; this is part of a last-ditch effort to force Apple and Nvidia to buy American silicon.
The issue is that Intel manufacturing chips in the US wouldn’t have solved the chip problems with cars for instance.
What TSMC traditionally does is keep trailing edge fabs online that are fully depreciated and use those to produce chips that don’t need to be leading edge. It wouldn’t make sense to create a new fab for trailing edge chips.
Car manufacturers aren’t going to all of the sudden start using 2mm expensive chips for their cars.
Even for TVs, the BOM for the “smarts” need to be under $10.
The chip shortage only came about because everyone cancelled their chip orders and then had to re-queue in a different order and they found themselves at the back of the line.
Their lack of planning doesn't constitute an emergency on the public's part
Yeah, behind all the partisan chaff, serious people think falling behind in AI could be disastrous. Getting locked out of it altogether because you lost your only source of advanced chips would be even worse.
I always hear about Taiwan and TSMC for Nvidia, but what I never heard until recently is that all these forbidden and banned chips are still assembled into GPUs in China. I am not sure how the US beleives any of this will do much good when the the chips are still sent to China to be completed into GPUs and other AI devices.
I mean obviously it's about chip production, but shitting on the chips act is a political stunt and nothing more.
Building fabs takes lots of money and time.
Intel also doesn't have customers except themselves and have fallen far behind in the fab business and has a decade+ or mistakes to make up for.
What we have here is picking a winner and potentially insider trading/market manipulation with Trump shitting on Intel leading up the "deal".
On the one hand, I strongly agree with this article. This kind of state ownership never brings anyhing good. I don't see how this is different.
On the other, it is hard to deny how impressive the new wave of Chinese manufacturing is. No longer are they just making knock offs of Western products with stolen IP. BYD for example seems genuinely innovative, a top product. There are many other examples.
Now, these are clearly not state-ran enterprises, but equally the state is heavily involved. Or, Nvidia is concerned because China can mandate that the whole country pivots to using Chinese GPUs, seemingly with no deteiment to their AI research, while amazingly benefitting their own chip production ability.
To be honest, regardless of the government involvement or not, I have little hope for intel. Maybe they can, over time, have an AMD-esque comeback, but given their track record of the past few years I'm not hopeful.
The Pentium -> Core2Duo was a great era for intel, but I feel like ever since then they've started a decline in both price/value proposition as well as just general hardware.
The i-series was arguably pretty good for gaming, but then they started exploiting that position by having relatively poor price-to-performance, thinking they wouldn't have any competition.. and they kept the 'we are winning' mindset even while AMD was hot on their heels.
I really wonder, why so much noise about this case. I agree, semiconductors are extremely important in current world, but did you know, Volkswagen AG is partially owned by State of Lower Saxony (~ 11.8%)?
Also worth to remember cases of Rolls-Royce, Ericsson, and some other unfortunate Western companies, important for many humans, but once became unable to stay economically viable. (BTW it make me laugh, when I got info, Bentley now under WAG, when RR under BMW, as technically, they many decades was one entity)
WAG case is different from Intel case (and other I mention), but there are also many similarities, because of which I think, Intel case may be special for US, but is not too special for West.
And I think, such cases are bad, they are great shame, but also they are signs, we must do something, to make Western produced semiconductors more competitive.
To be honest, for most Chinese people, the reason we haven't taken action regarding Taiwan is not because of TSMC, but rather our patience with the current will of the Taiwan people. However, this patience has its limits. Even if TSMC has better chips now, China mainland will surpass them next 10 years. You can compare the gap in chip technology between Chinese companies in 2015 and that projected for 2025 to see this trend. As for Intel, we don't really care about it.
I think that the difficulty for Intel is that they don't seem to attract the best talent anymore like they did 20 years ago. A big part of the job of running a leading edge fab is solving a lot of very tricky technical problems, and a lot less of those people work at Intel than used to. There are feedback loops in these things. The top people want to work with other top people. To some degree you can try to find those people and just offer them tons of money, which is what seemingly happened with Jim Keller (on the logic rather than the fab side, but still), but then he went and quit shortly thereafter.
Without the right people at the company, you can dump almost infinite money at a problem and still not solve it.
Maybe it's worth noting that the new CEO's explosive statement, Intel would give up development of leading edge nodes (14A and beyond) unless they find a large external customer in advance, hardly got any attention on Hacker News or other websites. But that was almost certainly the reason the US administration got involved. This blog post thankfully makes this point clear.
In the past, most people (including myself) just assumed the worst case was merely Intel selling its chip manufacturing division to some other US company which would then continue to develop new advanced nodes like 14A.
But that was not at all what Lip Bu-Tan (the new Intel CEO) suggested at the earnings call. He said Intel would simply stop developing new nodes and just use the existing 18A fabs as long as there is demand. And then, presumably, closing all the fabs and fully switching to TSMC, becoming another AMD.
the president unilaterally extorting 10% ownership out of a company isn't going to build the kind of system that competes with anyone. Big business can't really thrive under this kind of thing any more than corner stores can thrive under a protection racket.
I’m confused. Why is equity required when the current loan guarantees were perfectly adequate? The only answer is that the USG wanted more control and leverage than was required to achieve national security objectives. Kinda negates the whole approach to the article in my opinion.
This article says its steel-manning the equity stake but its actually an argument for Intel being "too big to fail" and then conflating that with an equity stake.
I do find his argument for Intel being "too big to fail" compelling, for whatever it's worth. But it was kind of surprising to only see 1 sentence at the end claiming the equity stake is necessary. I thought we were actually going to get an analysis on the deal and the dynamic it would create.
I'm not an expert, but I would of vastly preferred a fund to start a bunch of smaller fab companies.
Most systems don't need start of the art processors. Get some minimal fabs set up for RISC V chips. If we removed the profit motive, how much does this cost ?
Alternatively...
Even a refurbished GameCube can probably run a basic rest API server.
If anything we have enough EWaste that we can probably just recycle what we have. At least for most applications.
Key graf: "The problem facing the U.S. is not simply the short-term: the real problems will arise in the 2030s and beyond. Semiconductor manufacturing decision-making does not require nimbleness; it requires gravity and the knowledge that abandoning the leading edge entails never regaining it."
Foundries aren’t the only special case. The test should be, if we can’t afford for it to fail, it shouldn’t be left to the market. Another example? Farms. Also healthcare (expect to hear more on this front in the next few years as more and more hospitals go under, especially in rural areas).
OT: am I the only one who thinks booting Gelsinger was a huge mistake? Semiconductor business is not one you steer in few years, everything is planned years ahead and he had the right ideas imho.
I’m not sure why what he's saying is so outlandish to many ( at least to some of the papers he’s quoting ): we’re in a world which looks increasingly like the cold war all over again, and my immediate reaction when I saw the headline was ‘ah yes China this makes sense’. We’re not talking private capital - it’s national interests being pushed, for long term reasons, and probably a bit late.
Now I’m European so this seems obvious to me, coming from a culture of high government intervention but I might be very wrong!
> TSMC’s foundries — and Samsung’s — are within easy reach...
To be honest, every foundry is in easy reach of something that can take it out. If there's a conflict that results in missiles hitting Korean factories, someone will be drone-bombing the power interconnects or driving trucks into water purifiers or whatever and taking out foundries in Texas.
It doesn't take much to ruin semiconductor foundry throughput. Wafers spend weeks or even months progressing from stage to stage. If you can cause a power failure, for example, you can scrap the whole content of the line and there will be no output until the pipeline refills: https://www.forbes.com/sites/tomcoughlin/2019/07/05/nand-fab...
Perhaps process robustness is better now, but in the constant scrambling state of semiconductor manufacturing, I doubt it is better enough to be able to shrug off concerted, deliberate attacks rather than just accidents, fuckups and bad luck.
> Government involvement in private business almost always ends badly.
I don't say this to argue with the author or try to refute anything they are saying, but this bit toward the end is a very interesting position that I think displays the level of anti-regulation, anti-taxation, anti-government propaganda we are bombarded with by corporations.
People just kind of assume that the government can't function or work with private enterprise in any way when it does that all the time.
China is the elephant in the room of a counterexample. Who built the largest high speed rail network in the world and who owns them? Or how about the US military industrial complex? Or how about SpaceX? What about the time when the US government ordered factories to build Jeeps in WW2?
I don't really agree with...well...anything that the current administration is doing, but owning part of Intel isn't really horrendous. The horrendous part is that it came out of nowhere with apparently no congressional appropriation of funds/approval of such an endeavor.
> Intel fell behind TSMC, who was powered by massive orders from Apple in particular
> the China concerns are real, Intel Foundry needs a guarantee of existence to even court customers, and there really is no coming back from an exit. There won’t be a startup to fill Intel’s place. The U.S. will be completely dependent on foreign companies for the most important products on earth, and while everything may seem fine for the next five, ten, or even fifteen years, the seeds of that failure will eventually sprout, just like those 2007 seeds sprouted for Intel over the last couple of years. The only difference is that the repercussions of this failure will be catastrophic not for the U.S.’s leading semiconductor company, but for the U.S. itself.
This was always going to be the logical conclusion to US hostile policy regarding the the proliferation of IC fabrication. The US, not cost, was the primary factor that discouraged many countries from pursuing their own IC fabrication capabilities. Had they not been so hostile, many countries would have had enough capacity to cover for the US until it rebooted its own industry.
This is also the same trap that China is barrelling into right now and they will absolutely find themselves in the same position eventually.
If the US did go all the way with 100% ownership, would that even be a bad thing? American companies would have access to cutting edge chips which would presumably be able to be sold near cost at least on the domestic vs export market. No where on earth would be able to offer as competitive a margin. Innovation in so many categories would be spurred and would happen stateside.
for all this talk about intel struggling, they seem to be quite capable to continue producing very competitive CPUs and other IP.
my understanding is that they are still doing well in the datacentre world, unless that has changed?
its worth keeping in mind Intel is quite a big company... and naturally, the parts that are chugging along just fine are not going to be making headlines (or much noise at all really.)
You know, we can just provide critical industries with direct assistance in the form of subsidies. There’s no need for the US government to take an equity stake.
Nationalizing companies - and that is essentially what we’re starting with Intel - worked out horribly for the Brits last century.
The book "Apple in China" by Patrick McGee focuses on this point in early 2000 top 5 contract manufacturers were in north america. By around 2010 the top one was foxconn which was larger than the next 4 combined. This is going to play out everywhere and result in extreme circumstances.
I think the issue is not just that that its capitalism causing wage issues, its the fact that people think they can control the painless socioeconomic transition that comes with incomes increasing with matching productivity gains, or worst halt and try and reverse it. One or more things will eventually cause a pop/crash/revolution:
- Endless high returns on capital: Wealth accumumlation for < top 50% of the people causes high enough inflation as these highly capitalized groups look to buy every single asset (think blank street day care and paying 200$ per month for trash disposal) to turn them into rent seeking ones.
- Large debt countries moment of reckoning: At some point a black swan event leading to higher inflation with no leg room for more borrowing like 2008. Bond markets will dictate fiscal tightening and politicians will likely take control of monetary and fiscal policy ending capitalistic bedrocks for them. This will feed into the Endless high return on capital cycle. Government will bow out of every service to service the debt through taxes.
- People not seeing any upward progress in their economic status or careers: Large populations find high upfront cost/headwind to enter into new economies. Failure to adapt, political choices become extreme.
- Deflationary effects due to progress of china, korea, japan etc due to cost of innovation crashing: At some point large economies become advanced enough that cost of highly specialized goods exported by private companies in highly indebted countries will fall causing non dollar currencies to experience deflation and undermine reserve currencies.
The only countries with leverage left would be the ones the ones with technology that is highly integrated into the society at a level that its people can rapidly change behaviors and adapt without losing wealth/landing on the street. After all you can convince a person he wasn't cheated by God/Demagogue, but you cannot convince them that they are not hungry.
Some of this is already happening in fits-and-jerks motion relative to pace of progress since industrialization. Add things like climate change to the mix and you might not be able to ask "how fast?".
I didn’t realize steelmanning requires strawmanning the opposing view.
A 10% stake does what? Nothing. The U.S. doesn’t even get decision making capabilities.
OTOH, the CHIPS Act created an incredible amount of semiconductor manufacturing capacity from a wide variety of manufacturers including both TSMC and Intel.
So the real question is what does getting a 10% stake do, that the CHIPS act which Trump is trying to retroactively destroy, isn’t doing much better?
Honestly the fact that we don’t have a sovereign wealth fund invested in US equities is just silly. I get that you don’t want too much central interference in the economy but it feels like leaving money on the table
> President Donald Trump’s announcement on Friday that the U.S. government will take a 10 percent stake in long-struggling Intel marks a dangerous turn in American industrial policy. Decades of market-oriented principles have been abandoned in favor of unprecedented government ownership of private enterprise.
Really? A decade and a half ago the US government owned a 60.8% of GM and none less than Barack Obama was directing management changes.
The US has a long and well established history of being a mixed-market economy to varying degrees.
I don't understand how they can say Democrats are Communists while they do this. It's going to be interesting hearing everyone who spent decades spilling volumes about the evils of communism and the failure of the USSR quickly pivot to being champions of state capitalism.
Intel is dead to me for capitulating to narcissistic, authoritarian, inhuman, apathetical Donald Trump.
There is no one in the Trump administrator that has the balls to tell Donald Trump he is and idiot and doesn't know what he is talking about. Intel will bend over backwards and fail because of this mentality. Donald Trump knows better than all the engineers at Intel according to his followers. Just like when stated he knows more about dish washers than anyone else in the world.
Intel will need to hide the actual course their are taking to actual product a viable solution. This scenario seems to mirror the development of the MP43/MP44. Government was against it because the administration was too dumb to understand it. Government will also like short versus long term gains because the short gains allow for quick propaganda usage.
Let me just say, for those of us who remember the 1990s and 2000s, Intel's drop off has been something nobody would've predicted. It's hard to overstate just how dominant they were (other than the fairly brief but significant Athlon64 era). And even when they were behind on consumer CPUs, which they were until the Core Duo/Centrino platform (which was really the Pentium 3) saved them from the Pentium 4 disaster, their fab ability was second to none.
So what happened? Capitalism happened. More specifically, financialization happened. Everything US companies does comes down to simply cutting costs and increasing profits for short-term financial performance. There is (now) absolutely no long term thinking. CEOs get parachuted in and stay just long enough to collect a huge golden parachute before the merry-go-round continues. And who are approving these massive CEO pay packets? Other CEOs who sit on the board.
We've seen this exact same thing happen with Boeing. The only things holding Boeing together are the inertia from earlier successes, the 737 type rating monopoly for budget airlines and defense contracting. Just look at the Starliner project to see Boeing actually try to build anything.
An example of this financialization is the likes of Dell, Gateway, IBM, HP, Compaq, etc all started to cut costs by offshoring parts of their operations to Taiwan. At first it was just assembly and then it was certain parts (eg motherboards) and at some point they had completely funded the Taiwan PC industry and created Asus, Acer, MSI, etc. US computer manufacturers completely paid for the Taiwan PC industry by short-term profit seeking.
There are multiple ways to describe China's economy but the most accurate and relevant for this topic is that it's a command economy and the coming years will show just how much more devastatingly effective this will be. Really the only thing stopping Chinese companies from destroying Western competitors is trade barriers (eg BYD).
So I think the US government should take equity interests in companies they bail out rather than just giving them gifts or even loans. The government should (IMHO) also take equity stakes in any extraction companies (eg oil and gas). China shows this can work.
So why won't it work here? Because the administration is both corrupt and incompetent. Everything done by the administration is to line the pockets of politicians and the wealthy on a very short-term basis. You see it in Congressional stock trades (eg buying up Intel ahead of the announcement).
As for the author, I suspect he represents the American corporate view that any kind of government intervention (beyond bail outs) cannot work because they don't want that long term. It would reduce profits and/or make a few people slightly less wealthy. They spend a lot of money on propaganda to convince ordinary people that corporatism is good and collectivisim of any kind is bad, that governments aren't capable of anything, etc.
All Western companies and billionaires want is public-private partnerships because they're a massive wealth transfer from the government to the wealthy. They don't want the government taking away profits from private hands.
How is this ‘equity stake’ different than nationalization? (The thing that soviet socialism did to russian property and business a hundred years ago). After all the government prints the money. So instead of just taking control of a company the govt prints the money to buy it. Isnt it the same thing?
And where is the example of a successful govt run business?
Why dont we encourage businesses here w free trade zones?
>ntel making decisions for political rather than commercial considerations
> Intel’s board prioritizing government interests over their fiduciary duties
How about Disney, Mozilla and every major corporation? You must hire right people (including this lame CEO and board), or no loans and contract for you!!!
US government pushed really really hard their agenda onto ALL industries without any lube for past 40 years!
If US gov actually directly express what they want, and just buy 10% of strategic company on open market, it is super refreshing!!
I’ll be honest: there is a very good chance this won’t work .... At the same time, the China concerns are real, Intel Foundry needs a guarantee of existence to even court customers, and there really is no coming back from an exit. There won’t be a startup to fill Intel’s place. The U.S. will be completely dependent on foreign companies for the most important products on earth, and while everything may seem fine for the next five, ten, or even fifteen years, the seeds of that failure will eventually sprout, just like those 2007 seeds sprouted for Intel over the last couple of years. The only difference is that the repercussions of this failure will be catastrophic not for the U.S.’s leading semiconductor company, but for the U.S. itself.
Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
If I may add my view as a formerly high-achieving semiconductor worker that Intel would benefit greatly from having right now, a lot of us pivoted to software and machine learning to earn more money. My first 2 years as a software engineer earned me more RSUs than a decade in semiconductors. Semiconductors is not prestigious work in the U.S., despite the strategic importance. By contrast, it is highly respected and relatively well remunerated in the countries doing well in it.
From this lens, the silver lining of the software layoffs going on may be to stem the bleeding of semiconductor workers to the field. If Intel were really smart, they’d be hiring more right now the people they couldn’t get or retain 3-5 years ago
Well, there's a really easy and straightforward explanation for how this happened. It's just uncomfortable for everyone who's succeeded because of it. So they don't say it.
America abandoned free enterprise in favor of managed monopolies. It happened via a wave of financialization, globalization, government bailouts, mergers and consolidation that all granted immediate financial benefits to shareholders, at the cost of long term competitiveness.
That's it that's the whole story in a nutshell, look at Boeing, Intel and others, you'll see it again and again.
This is not the right way and US economics are looking more like Mussolini's every day.
Force these incumbents to compete. With fragments of each other, or with new American companies. Perhaps shelter them from some foreign competition if you really must.
That would once again unlock the unparalleled power of the 350 million enterprising souls spread between the two coasts. Which is what got America to #1 in the first place.
Give those souls something to do again that isn't meth or opiates.
Managed monopolies are not the way.
It's such a stunning dereliction the US let things get to this point.
It's a side effect of systemically putting short term gains ahead of long term research. CHIPs act may be too little, it is certainly too late...
This and everything else. We outsourced manufacturing of almost everything then are surprised when the people doing it for decades are better than we were.
The reason this pivot happened was because of the Pandemic. As soon as the Pandemic hit and China stopped sending us PPE it was a violent slap in the face and an extremely rude awakening that we are completely dependent on China and other countries for basic necessities. India also stopped sending us pharmaceuticals.
This realization means that no matter what, Americans need to make certain basic necessities, and chips are one of them. I have friends at Intel that have been there for 20 years and they basically say it's dead man walking. They have chip equipment that they paid billions for that is sitting idle because they don't have the demand, but they can't turn them off otherwise it will be destroyed. However, these machines cost hundreds of millions to keep on. Plus they are already out of date compared to TSMC. The entire thing is a disaster, but Americans need an American source of chips so they have no choice but to double and triple down on a bad investment and hope that something happens that will let them become competitive again.
> Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
What's annoying about this is that it's the same people who drove the outsourcing and decline of American industry who are using the same framework they've been using to drive that stunning dereliction to argue that this is the wrong approach.
Perhaps then fabs should be considered important enough for the US then that a new entity, perhaps not unlike NASA, is created to create and run these.
I believe something similar is happening in drug development right now. It may take less than 5, 10, 15 years to see the impact to the US. But from someone who has a vantage point to see it across many parts of the industry, including having seen the evolution of Intel / TSMC, I think it is a very similar story. Right now is like 2007 (or maybe even a bit later) for therapeutics. In the future, we will look back on this year as the year we gave it up.
Is it just me or is the author only making an argument for why Intel is too big to fail? He says hes steelmanning the equity stake but then he doesn't argue why it's necessary. He devotes 2 sentences to CLAIMING its necessary after aruging that Intel is too big to fail.
The article is basically like this:
> Leading edge domestic foundry companies are a national security concern. Therefor Intel is too big to fail.
OK. Many can agree with this. And I think the author makes a very good argument for it. He makes some good points:
- Startup cant replace Intel - US cant rely on TSMC alone - Artificial demand could actually improve Intel by solving the chicken and egg problem
But that doesn't answer the question, "why the equity stake?" And for more context, it's replacing what would have been grants with the equity stake. So it's, "Why replace the $XB in grants with an equity stake?"
He does touch on it but it's just a claim thrown in at the end:
>The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere. There simply isn’t a credible way to make that promise without having skin in the game, and that is now the case.
OK, maybe. But that now needs to be argued for. The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms.
> over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt?
Over a decade ago Intel wasn't driving itself into the dirt. Their failure was just beginning approximately 1 decade ago, starting with their failure at EUV leaving them trapped on 14nm.
I would like to challenge the notion that you absolutely need state of the art fabs to win a war. Most military gear uses "proven technology" several generations behind SOTA. When push really comes to shove there is a lot you can do with the chips you already have and nationalizing the fabs under your control.
The dependence on oil from the Middle East is comparatively a bigger problem for the West (though not for the US with its shale oil reserves).
>It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
There were a few of us warning about this well before it all happened in 2013 and 2014. Predicted the death of Intel, and surge of AMD and TSMC before majority of people even heard of TSMC.
I also feel a little sad about TSMC, now that they have invested a lot in US but US is actively and strategically trying to pop up Intel to compete. But TSMC is at least 2 cycle ahead, meaning 5 - 6 years time. Unless TSMC make any mistakes even in the best case scenario I dont see Intel catching up within that time frame. Especially now they have little to no cash cow. Server, GPU, Consumer CPU are all under threats.
This is the same reason France keeps propping up STMicroelectronics and their fab in Crolles, France (near Grenoble).
There is strategic importance in maintaining home-grown capability.
(it's also the same reason France keeps propping up many other industries, and sells weapons/jet fighters to other countries...)
If all advanced countries follow this reasoning, where does that leave us?
People have been raising this alarm for decades as more of our domestic manufacturing is off shored. Few listened then. It's unlikely we will come back from this.
Maybe the problem for Intel is complacency exactly because there is this expectation of a bailout when things don't go to plan.
While other hardware companies got lean operationally and employee wise Intel did not. The ex-Intel employees all paint somewhat the same picture of bureaucracy, layers of (poorly managed) dependencies and reliance on paradigms that worked during late 90s / early 2000s.
If you followed sources like semiaccurate the situation at Intel is not surprising either, they've been reporting on issues there since their inception.
>There won’t be a startup to fill Intel’s place.
That’s Intel management’s FUD building a moat against such startups with the government’s help.
Several billions of dollars is not a scary level of funding these days for such startups to happen. Plus CHIPS pile of hundreds of billions. Plus Nvidia, Google, Amazon, Apple and others can always form a consortium to build a foundry. A lot of options, yet all of them are being killed by the Intel management skillfully working the bronze ear. That is how a tech race is lost - by letting government instead of the market to pick winner.
There's a real folly in capitalist countries thinking they can be self-sufficient walled castles. Capitalism by its nature will seek out the lowest cost be it in labor or manufacturing. That means often means outsourcing.
Our system has no breaks for this. In fact it works actively for this, hence the neolib ideal of "just move towards efficiencies, and let the chips fall where they may." This is ideal under capitalism. As long as we avoid the needed migration to socialism, this is the best we can do.
Neolib economies generally work as much as anything "works" under capitalism. The GDP of the USA, median salary, quality of life, etc was the envy of the world until the recent nationalist movement that's based on "insourcing" and tariffs. You can't go back and capitalism migrates to efficiencies, which means outsourcing. Its more efficient to export factories and keep cushy office/service jobs here and drain the profits from those factories overseas.
Nationalism/protectionism and capitalism are fundamentally incompatible, so here we are. Demagogy and populism and "return to the past" mentalities used to win political power are the actual problem here.
Also what exactly happens if intel goes under? We have to buy 'foreign' licensed ARM? Manufacture in Asia? We're already doing that. And we have AMD which is a good, if not, superior product, regardless of manufacturing locale. We don't need local fabs the same way we don't need local factories for a lot of other things. You can't just depress wages with a wave of a hand nor do tariffs work outside of some really focused edge cases.
>The U.S. will be completely dependent on foreign companies
This is true of nearly all things in nearly all countries. Recent nationalist movements won't change how capitalism works and recent tariffs and protectionism has only hurt these industries and the working class. The toothpaste is out of the tube and it cannot be put back in. What we're seeing with the government buying intel is an attempt to do that, and it will fail. Expect more tomfoolery like this until we get responsible leadership, but until then we all have to sit here and watch these various economic horrors unfold. Be it this, inflation, mindless tariffs, etc. This will fail and its obvious it will, but currently it buys political power, so we will go this route because voters, largely uninformed on how capitalism works, think this is the "one weird trick" that will make them wealthy. It won't. In fact, all recent indicators are more negative as these policies continue. It will instead make them poor.
Intel was the best until fairly recently. Then they still looked like the best to a non-expert observer, and then still looked at least competitive until even more recently. The modern world changes too fast for our governments to adapt to. Especially when we're talking about state of the art semiconductors and our leader was born before the invention of the transistor.
> "The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere."
If the last 8 Months of this year has shown something, it's that every decision the US takes could be considerate, but as likely also completely random and reversed and bent at any moment in the future.
Accepting those risks in order to sell in the US-market (assuming it would be required) requires that the US-market also provides the commercial rewards.
For now I don't see that this is secured in sufficient volume to justify such an investment, considering that it will take YEARS for Intel to actually become a viable foundry and have a customer product ready to be produced there. And I'm not even talking about the potential cost-increase vs. an established high-volume foundry...
> every decision the US takes could be considerate, but as likely also completely random and reversed and bent at any moment in the future.
This my main problem with this investment. I can certainly appreciate the benefit of US government investment to ensure "homegrown" production capabilities. However, this depends a lot on a level of understanding, intelligence, and planning from the US federal government which is monumentally lacking. If no one trusts Intel now, I cannot begin to imagine how anyone would view Intel plus the current US government as more trustworthy.
Just look at the current approach to tariffs as a good example for how current "industrial policy" is being carried out. Unpredictable, vengeful, and declared with little plan or forethought. Why should we expect any differently from other policies?
Best case, we get President Vance before 2028 and things settle down.
The other day when the US's stake in Intel was announced, people assumed it was a political stunt. I suspected it was because of national security interests. The CHIPS act probably didn't get the result US Defense wanted quickly enough. Some details that were glossed over include that there was a chip shortage a few years ago as a result of COVID and TSMC supply chain disruptions that led to a shortage in electronics and automobiles even. This started to look like a national security interest back then.
Second, there is an AI race going on. US intelligence is taking it very seriously and views supremacy of our AI as very important. Recently, the US was pushing NVDA to start using Intel's foundry. I assume it's for national security reasons.
Finally, a couple of details from the Intel deal that were not widely discussed is that the US is taking a passive seat[1]
The government’s investment in Intel will be a passive ownership, with no Board representation or other governance or information rights. The government also agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions.
There are also warrants being given whose status is based on Intel's foundry. That suggests the foundry was the interest all along.
[1]: https://www.intc.com/news-events/press-releases/detail/1748/...
> The CHIPS act probably didn't get the result US Defense wanted quickly enough.
It might have helped if they actually distributed the authorized funds. CHIPS act was passed just over 3 years ago now, and Intel never received their grant money (which has now turned into the cash for equity deal of dubious legality).
> Recently, the US was pushing NVDA to start using Intel's foundry. I assume it's for national security reasons.
The real reason is simple, if you've been following IFS: Intel's foundry has no large customers. The free market has spoken and almost every single customer prefers TSMC or Samsung silicon. America was boxed-out of serious world-class chip manufacturing ever since Intel swerved on EULV. If it was for natsec reasons then I doubt the fed would waste their time taking a passive seat when they could claim Intel as eminent domain.
It's not about national security whatsoever; this is part of a last-ditch effort to force Apple and Nvidia to buy American silicon.
The issue is that Intel manufacturing chips in the US wouldn’t have solved the chip problems with cars for instance.
What TSMC traditionally does is keep trailing edge fabs online that are fully depreciated and use those to produce chips that don’t need to be leading edge. It wouldn’t make sense to create a new fab for trailing edge chips.
Car manufacturers aren’t going to all of the sudden start using 2mm expensive chips for their cars.
Even for TVs, the BOM for the “smarts” need to be under $10.
The chip shortage only came about because everyone cancelled their chip orders and then had to re-queue in a different order and they found themselves at the back of the line.
Their lack of planning doesn't constitute an emergency on the public's part
Yeah, behind all the partisan chaff, serious people think falling behind in AI could be disastrous. Getting locked out of it altogether because you lost your only source of advanced chips would be even worse.
I always hear about Taiwan and TSMC for Nvidia, but what I never heard until recently is that all these forbidden and banned chips are still assembled into GPUs in China. I am not sure how the US beleives any of this will do much good when the the chips are still sent to China to be completed into GPUs and other AI devices.
I mean obviously it's about chip production, but shitting on the chips act is a political stunt and nothing more.
Building fabs takes lots of money and time. Intel also doesn't have customers except themselves and have fallen far behind in the fab business and has a decade+ or mistakes to make up for.
What we have here is picking a winner and potentially insider trading/market manipulation with Trump shitting on Intel leading up the "deal".
I am torn on this.
On the one hand, I strongly agree with this article. This kind of state ownership never brings anyhing good. I don't see how this is different.
On the other, it is hard to deny how impressive the new wave of Chinese manufacturing is. No longer are they just making knock offs of Western products with stolen IP. BYD for example seems genuinely innovative, a top product. There are many other examples.
Now, these are clearly not state-ran enterprises, but equally the state is heavily involved. Or, Nvidia is concerned because China can mandate that the whole country pivots to using Chinese GPUs, seemingly with no deteiment to their AI research, while amazingly benefitting their own chip production ability.
I'm not sure how I reconcile these two.
To be honest, regardless of the government involvement or not, I have little hope for intel. Maybe they can, over time, have an AMD-esque comeback, but given their track record of the past few years I'm not hopeful.
The Pentium -> Core2Duo was a great era for intel, but I feel like ever since then they've started a decline in both price/value proposition as well as just general hardware.
The i-series was arguably pretty good for gaming, but then they started exploiting that position by having relatively poor price-to-performance, thinking they wouldn't have any competition.. and they kept the 'we are winning' mindset even while AMD was hot on their heels.
I really wonder, why so much noise about this case. I agree, semiconductors are extremely important in current world, but did you know, Volkswagen AG is partially owned by State of Lower Saxony (~ 11.8%)?
Also worth to remember cases of Rolls-Royce, Ericsson, and some other unfortunate Western companies, important for many humans, but once became unable to stay economically viable. (BTW it make me laugh, when I got info, Bentley now under WAG, when RR under BMW, as technically, they many decades was one entity)
WAG case is different from Intel case (and other I mention), but there are also many similarities, because of which I think, Intel case may be special for US, but is not too special for West.
And I think, such cases are bad, they are great shame, but also they are signs, we must do something, to make Western produced semiconductors more competitive.
https://en.wikipedia.org/wiki/Volkswagen_Group
To be honest, for most Chinese people, the reason we haven't taken action regarding Taiwan is not because of TSMC, but rather our patience with the current will of the Taiwan people. However, this patience has its limits. Even if TSMC has better chips now, China mainland will surpass them next 10 years. You can compare the gap in chip technology between Chinese companies in 2015 and that projected for 2025 to see this trend. As for Intel, we don't really care about it.
I think that the difficulty for Intel is that they don't seem to attract the best talent anymore like they did 20 years ago. A big part of the job of running a leading edge fab is solving a lot of very tricky technical problems, and a lot less of those people work at Intel than used to. There are feedback loops in these things. The top people want to work with other top people. To some degree you can try to find those people and just offer them tons of money, which is what seemingly happened with Jim Keller (on the logic rather than the fab side, but still), but then he went and quit shortly thereafter.
Without the right people at the company, you can dump almost infinite money at a problem and still not solve it.
Maybe it's worth noting that the new CEO's explosive statement, Intel would give up development of leading edge nodes (14A and beyond) unless they find a large external customer in advance, hardly got any attention on Hacker News or other websites. But that was almost certainly the reason the US administration got involved. This blog post thankfully makes this point clear.
In the past, most people (including myself) just assumed the worst case was merely Intel selling its chip manufacturing division to some other US company which would then continue to develop new advanced nodes like 14A.
But that was not at all what Lip Bu-Tan (the new Intel CEO) suggested at the earnings call. He said Intel would simply stop developing new nodes and just use the existing 18A fabs as long as there is demand. And then, presumably, closing all the fabs and fully switching to TSMC, becoming another AMD.
the president unilaterally extorting 10% ownership out of a company isn't going to build the kind of system that competes with anyone. Big business can't really thrive under this kind of thing any more than corner stores can thrive under a protection racket.
I’m confused. Why is equity required when the current loan guarantees were perfectly adequate? The only answer is that the USG wanted more control and leverage than was required to achieve national security objectives. Kinda negates the whole approach to the article in my opinion.
This article says its steel-manning the equity stake but its actually an argument for Intel being "too big to fail" and then conflating that with an equity stake.
I do find his argument for Intel being "too big to fail" compelling, for whatever it's worth. But it was kind of surprising to only see 1 sentence at the end claiming the equity stake is necessary. I thought we were actually going to get an analysis on the deal and the dynamic it would create.
I'm not an expert, but I would of vastly preferred a fund to start a bunch of smaller fab companies.
Most systems don't need start of the art processors. Get some minimal fabs set up for RISC V chips. If we removed the profit motive, how much does this cost ?
Alternatively... Even a refurbished GameCube can probably run a basic rest API server.
If anything we have enough EWaste that we can probably just recycle what we have. At least for most applications.
Standard Silicon is a nice name. Maybe they should use it.
Other possibilities:
- Standard Circuit
- Standard Semiconductor
- Standard Microchip
Key graf: "The problem facing the U.S. is not simply the short-term: the real problems will arise in the 2030s and beyond. Semiconductor manufacturing decision-making does not require nimbleness; it requires gravity and the knowledge that abandoning the leading edge entails never regaining it."
Foundries aren’t the only special case. The test should be, if we can’t afford for it to fail, it shouldn’t be left to the market. Another example? Farms. Also healthcare (expect to hear more on this front in the next few years as more and more hospitals go under, especially in rural areas).
OT: am I the only one who thinks booting Gelsinger was a huge mistake? Semiconductor business is not one you steer in few years, everything is planned years ahead and he had the right ideas imho.
I’m not sure why what he's saying is so outlandish to many ( at least to some of the papers he’s quoting ): we’re in a world which looks increasingly like the cold war all over again, and my immediate reaction when I saw the headline was ‘ah yes China this makes sense’. We’re not talking private capital - it’s national interests being pushed, for long term reasons, and probably a bit late.
Now I’m European so this seems obvious to me, coming from a culture of high government intervention but I might be very wrong!
> TSMC’s foundries — and Samsung’s — are within easy reach...
To be honest, every foundry is in easy reach of something that can take it out. If there's a conflict that results in missiles hitting Korean factories, someone will be drone-bombing the power interconnects or driving trucks into water purifiers or whatever and taking out foundries in Texas.
It doesn't take much to ruin semiconductor foundry throughput. Wafers spend weeks or even months progressing from stage to stage. If you can cause a power failure, for example, you can scrap the whole content of the line and there will be no output until the pipeline refills: https://www.forbes.com/sites/tomcoughlin/2019/07/05/nand-fab...
Perhaps process robustness is better now, but in the constant scrambling state of semiconductor manufacturing, I doubt it is better enough to be able to shrug off concerted, deliberate attacks rather than just accidents, fuckups and bad luck.
> Government involvement in private business almost always ends badly.
I don't say this to argue with the author or try to refute anything they are saying, but this bit toward the end is a very interesting position that I think displays the level of anti-regulation, anti-taxation, anti-government propaganda we are bombarded with by corporations.
People just kind of assume that the government can't function or work with private enterprise in any way when it does that all the time.
China is the elephant in the room of a counterexample. Who built the largest high speed rail network in the world and who owns them? Or how about the US military industrial complex? Or how about SpaceX? What about the time when the US government ordered factories to build Jeeps in WW2?
I don't really agree with...well...anything that the current administration is doing, but owning part of Intel isn't really horrendous. The horrendous part is that it came out of nowhere with apparently no congressional appropriation of funds/approval of such an endeavor.
> Intel fell behind TSMC, who was powered by massive orders from Apple in particular
> the China concerns are real, Intel Foundry needs a guarantee of existence to even court customers, and there really is no coming back from an exit. There won’t be a startup to fill Intel’s place. The U.S. will be completely dependent on foreign companies for the most important products on earth, and while everything may seem fine for the next five, ten, or even fifteen years, the seeds of that failure will eventually sprout, just like those 2007 seeds sprouted for Intel over the last couple of years. The only difference is that the repercussions of this failure will be catastrophic not for the U.S.’s leading semiconductor company, but for the U.S. itself.
Note that all our issues with china would be solved if we stopped pretending like they're our enemy.
Does the US need a domestic Intel more than domestic ASML (or Zeiss for that matter)?
This was always going to be the logical conclusion to US hostile policy regarding the the proliferation of IC fabrication. The US, not cost, was the primary factor that discouraged many countries from pursuing their own IC fabrication capabilities. Had they not been so hostile, many countries would have had enough capacity to cover for the US until it rebooted its own industry.
This is also the same trap that China is barrelling into right now and they will absolutely find themselves in the same position eventually.
If the US did go all the way with 100% ownership, would that even be a bad thing? American companies would have access to cutting edge chips which would presumably be able to be sold near cost at least on the domestic vs export market. No where on earth would be able to offer as competitive a margin. Innovation in so many categories would be spurred and would happen stateside.
As an aside, this guy really feels out of his depth post-pandemic. I get a lot more value out of folks writing more generally about macroeconomics.
for all this talk about intel struggling, they seem to be quite capable to continue producing very competitive CPUs and other IP.
my understanding is that they are still doing well in the datacentre world, unless that has changed?
its worth keeping in mind Intel is quite a big company... and naturally, the parts that are chugging along just fine are not going to be making headlines (or much noise at all really.)
If semiconductors are so vital to US military, the US military should invest in research to build them on their own.
You know, we can just provide critical industries with direct assistance in the form of subsidies. There’s no need for the US government to take an equity stake.
Nationalizing companies - and that is essentially what we’re starting with Intel - worked out horribly for the Brits last century.
Mariana Mazzucato has been doing a good case for it: https://www.ted.com/talks/mariana_mazzucato_government_inves...
The investment from Nvidia, instead of the government, would give Intel a better chance to survive.
I guess we just forgot about the US bailout of the big-3 auto manufacturers
The book "Apple in China" by Patrick McGee focuses on this point in early 2000 top 5 contract manufacturers were in north america. By around 2010 the top one was foxconn which was larger than the next 4 combined. This is going to play out everywhere and result in extreme circumstances.
I think the issue is not just that that its capitalism causing wage issues, its the fact that people think they can control the painless socioeconomic transition that comes with incomes increasing with matching productivity gains, or worst halt and try and reverse it. One or more things will eventually cause a pop/crash/revolution:
- Endless high returns on capital: Wealth accumumlation for < top 50% of the people causes high enough inflation as these highly capitalized groups look to buy every single asset (think blank street day care and paying 200$ per month for trash disposal) to turn them into rent seeking ones.
- Large debt countries moment of reckoning: At some point a black swan event leading to higher inflation with no leg room for more borrowing like 2008. Bond markets will dictate fiscal tightening and politicians will likely take control of monetary and fiscal policy ending capitalistic bedrocks for them. This will feed into the Endless high return on capital cycle. Government will bow out of every service to service the debt through taxes.
- People not seeing any upward progress in their economic status or careers: Large populations find high upfront cost/headwind to enter into new economies. Failure to adapt, political choices become extreme.
- Deflationary effects due to progress of china, korea, japan etc due to cost of innovation crashing: At some point large economies become advanced enough that cost of highly specialized goods exported by private companies in highly indebted countries will fall causing non dollar currencies to experience deflation and undermine reserve currencies.
The only countries with leverage left would be the ones the ones with technology that is highly integrated into the society at a level that its people can rapidly change behaviors and adapt without losing wealth/landing on the street. After all you can convince a person he wasn't cheated by God/Demagogue, but you cannot convince them that they are not hungry.
Some of this is already happening in fits-and-jerks motion relative to pace of progress since industrialization. Add things like climate change to the mix and you might not be able to ask "how fast?".
So the gist is to make Intel the Huawei but for US&A
It would have been more effective to pay Micron to build up the capabilities to be a general-purpose fab to compete with TSMC.
Is this the beginning of the US sovereign fund?
I didn’t realize steelmanning requires strawmanning the opposing view.
A 10% stake does what? Nothing. The U.S. doesn’t even get decision making capabilities.
OTOH, the CHIPS Act created an incredible amount of semiconductor manufacturing capacity from a wide variety of manufacturers including both TSMC and Intel.
So the real question is what does getting a 10% stake do, that the CHIPS act which Trump is trying to retroactively destroy, isn’t doing much better?
Honestly the fact that we don’t have a sovereign wealth fund invested in US equities is just silly. I get that you don’t want too much central interference in the economy but it feels like leaving money on the table
> President Donald Trump’s announcement on Friday that the U.S. government will take a 10 percent stake in long-struggling Intel marks a dangerous turn in American industrial policy. Decades of market-oriented principles have been abandoned in favor of unprecedented government ownership of private enterprise.
Really? A decade and a half ago the US government owned a 60.8% of GM and none less than Barack Obama was directing management changes.
The US has a long and well established history of being a mixed-market economy to varying degrees.
I don't understand how they can say Democrats are Communists while they do this. It's going to be interesting hearing everyone who spent decades spilling volumes about the evils of communism and the failure of the USSR quickly pivot to being champions of state capitalism.
"We should do something to preserve leading-edge chip manufacturing in the US. This is Something, therefore we should do it."
Intel is dead to me for capitulating to narcissistic, authoritarian, inhuman, apathetical Donald Trump.
There is no one in the Trump administrator that has the balls to tell Donald Trump he is and idiot and doesn't know what he is talking about. Intel will bend over backwards and fail because of this mentality. Donald Trump knows better than all the engineers at Intel according to his followers. Just like when stated he knows more about dish washers than anyone else in the world.
Intel will need to hide the actual course their are taking to actual product a viable solution. This scenario seems to mirror the development of the MP43/MP44. Government was against it because the administration was too dumb to understand it. Government will also like short versus long term gains because the short gains allow for quick propaganda usage.
Another reason not to buy Intel chips
The short version is: this can work but it won't.
Let me just say, for those of us who remember the 1990s and 2000s, Intel's drop off has been something nobody would've predicted. It's hard to overstate just how dominant they were (other than the fairly brief but significant Athlon64 era). And even when they were behind on consumer CPUs, which they were until the Core Duo/Centrino platform (which was really the Pentium 3) saved them from the Pentium 4 disaster, their fab ability was second to none.
So what happened? Capitalism happened. More specifically, financialization happened. Everything US companies does comes down to simply cutting costs and increasing profits for short-term financial performance. There is (now) absolutely no long term thinking. CEOs get parachuted in and stay just long enough to collect a huge golden parachute before the merry-go-round continues. And who are approving these massive CEO pay packets? Other CEOs who sit on the board.
We've seen this exact same thing happen with Boeing. The only things holding Boeing together are the inertia from earlier successes, the 737 type rating monopoly for budget airlines and defense contracting. Just look at the Starliner project to see Boeing actually try to build anything.
An example of this financialization is the likes of Dell, Gateway, IBM, HP, Compaq, etc all started to cut costs by offshoring parts of their operations to Taiwan. At first it was just assembly and then it was certain parts (eg motherboards) and at some point they had completely funded the Taiwan PC industry and created Asus, Acer, MSI, etc. US computer manufacturers completely paid for the Taiwan PC industry by short-term profit seeking.
There are multiple ways to describe China's economy but the most accurate and relevant for this topic is that it's a command economy and the coming years will show just how much more devastatingly effective this will be. Really the only thing stopping Chinese companies from destroying Western competitors is trade barriers (eg BYD).
So I think the US government should take equity interests in companies they bail out rather than just giving them gifts or even loans. The government should (IMHO) also take equity stakes in any extraction companies (eg oil and gas). China shows this can work.
So why won't it work here? Because the administration is both corrupt and incompetent. Everything done by the administration is to line the pockets of politicians and the wealthy on a very short-term basis. You see it in Congressional stock trades (eg buying up Intel ahead of the announcement).
As for the author, I suspect he represents the American corporate view that any kind of government intervention (beyond bail outs) cannot work because they don't want that long term. It would reduce profits and/or make a few people slightly less wealthy. They spend a lot of money on propaganda to convince ordinary people that corporatism is good and collectivisim of any kind is bad, that governments aren't capable of anything, etc.
All Western companies and billionaires want is public-private partnerships because they're a massive wealth transfer from the government to the wealthy. They don't want the government taking away profits from private hands.
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How is this ‘equity stake’ different than nationalization? (The thing that soviet socialism did to russian property and business a hundred years ago). After all the government prints the money. So instead of just taking control of a company the govt prints the money to buy it. Isnt it the same thing?
And where is the example of a successful govt run business?
Why dont we encourage businesses here w free trade zones?
>ntel making decisions for political rather than commercial considerations
> Intel’s board prioritizing government interests over their fiduciary duties
How about Disney, Mozilla and every major corporation? You must hire right people (including this lame CEO and board), or no loans and contract for you!!!
US government pushed really really hard their agenda onto ALL industries without any lube for past 40 years!
If US gov actually directly express what they want, and just buy 10% of strategic company on open market, it is super refreshing!!
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