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.
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
This was a poor business decision for exactly the reasons you’re pointing out. The market is dictating their failure and we’re now undermining it.
I started in hardware and pivoted to software for the same reason: It's easier to find higher paying jobs.
It's been strange to see the gap persist at companies that cling to salary data for compensation decisions. Incredible to see companies complain about not being able to find good hardware talent but then also refuse to pay hardware hires at the same level as software hires.
How about paying more then?
Show me the incentive and I'll show you the outcome.
When I interviewed at intel the position they were offering was to be the "owner" of a tool and I'd be on call.... Yeah no thanks, I get a PhD just to be owned by some company?
I loved, still love, the actual technology of semiconductor fabrication, but you’d have to pay me 8x what I was making for me to go back to the business of semiconductor fabrication.
I’ve never understood why that’s the case; they are also high leverage jobs where a few can do extraordinary work and be rewarded thus. Look at Nvidia. Their employees are well compensated and they stay and the company does fantastically.
It's not just the pay, a fab operates 24x7x365 and how management turns that into work practices and life for employees.
I once interviewed at a fab that offered 'better work life balance'...and what they meant was you weren't allowed to access any email or information off site so they couldn't bug you as much. In reality, it just meant you had to actually go in to the plant if anythign went wrong.
The issue seems to be one of negotiation power as the determinate of wages taken to an extreme - leading to companies taking a monopoly position, paying poorly, then falling to foreign competition due to lack of talent.
The cog-in-a-machine corporate culture is not fun. Tech culture is much healthier.
There's no upside to big electronics companies here.
They literally cannot have a culture that encourages the now-traditional job hopping that is so pervasive in American business culture. They can't afford 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 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...
That's more the stock market than the US government though. You could argue the US government tries to play a long game, and often the way the US plays that game is to let the free market decide (hands off, small government). It's definitely a valid strategy and has worked extremely well in a number of other industries, but for this specific niche, less so, and even then you could argue it's down to Intel's mismanagement than anything the government could or should have done.
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.
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.
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.
If I was explaining it I would say "a huge equity stake gives you a lot of votes and influence over the company's strategic direction", including what the returns to shareholders should look like.
Think of railways in countries where the government has say, a 50% stake.
It's not the same as taking part in decisionmaking? Intel could just say 'no' to grants. They don't have to accept the terms.
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.
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).
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.
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...)
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.
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.
This is the same short sighted nonsense that got us into this mess. What happens if China invades Taiwan tomorrow? They can cut off the supply of chips to most of the world and global economies will collapse overnight. You really haven't thought through the implications of having critical dependence on a single small island that a global power is incredibly invested in controlling.
It can mean outsourcing, but I think your broader point is undercut by the fact that the USD holds a very special place as the world reserve currency. This creates high foreign demand for the USD which pushes up the exchange rate and leads to US exports being less competitive on the international market (i.e. our manufacturing base gets hollowed out because it cannot compete). This is a large market distortion that the US actively defends because it benefits us in other ways. Tariffs and general protectionism is not a good thing in a free market, but that's not really what is happening at the international level.
Huh? France and Germany are prime counter examples of your statement.
Even for integrated graphics, Intel has been behind Apple’s/TSMC ARM based processor before the Mx based Macs.
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...
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?
Everything can for now be put under the umbrella of "US semiconductor sovereignty", but actually making this happen involves much more strategic planning and investment from the government.
For example, I doubt that Intel has sufficient experience as a foundry to support design-finalization for ARM, they are JUST starting NOW with this.
So who will pay for closing such gaps? Would they force e.g. Apple to use Intel as foundry and swallow all the associated cost, or would they rather accept Apple to source from a TSMC fab (which is built in US for the big customers like Apple and nVidia)
Because people making these decisions aren't chronically online....
... this ain't that, though. It's a one-off, not a reliable broadly-applicable policy, and it's not clear what kind of strategy it represents in the bigger picture. I also doubt the ownership structure is as hands-off as I'd prefer, though I admit I've not looked into the details (if there even are details yet—we've had a lot of reporting on things as if they've happened, that then sometimes go on to never actually happen, lately)
[EDIT] I further think it would be better than the status quo to acknowledge that we have an economy dominated by Zaibatsu now, and to use the government to leverage them for public benefit the way the "Asian Tigers" do/have, though I don't think this is that happening, either. I think we're currently picking the worst of three options, of "intentionally use them to their fullest; break them up; do nothing" (we've been on the "do nothing" track so far, having abandoned "break them up" in the '70s).
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/...
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).
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.
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.
Their lack of planning doesn't constitute an emergency on the public's part
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.
I'm not sure how I reconcile these two.
There's short term stable and long term stable.
Having a BDFL can, when the BDFL is genuinely concerned with the welfare of whatever they are managing, result in something much better than what would be created if designed by committee. This is equally true for software projects and nation-states. China, Singapore, Linux, Python, etc.
In the long term, having a BDFL really relies on that "B" being there, and especially when a nation state is involved, the tendency of human nature to corrupt will likely eventually take over.
Basically, while China is acting with great coordination from the now with good results, they are doomed to eventually either fall to pieces when the diktat is bad, a la "Great Leap Forward", or else transition to a more stable (less authoritarian) system.
They can only do things like:
> China can mandate that the whole country pivots to using Chinese GPUs
so many times before getting it wrong disastrously, and the longer it goes the more likely someone will get it wrong.
And, to the point of the article, SMIC is already doing 5nm manufacturing.
Political systems are more complex than dictator/freedom, there are lots of stakeholders. The USA stakeholders tend to be short-term focused financial engineers, this is separate from whether we have checks and balances or what color tie the President wears.
I think many people really underestimate this part. If you watch Back to the Future, they sort of deride Japanese goods as cheap knock offs. Later Japanese became an innovation powerhouse. Same thing happened with China. Previously derided for low quality knock-offs is now known for innovation.
No one seems to have the state-run enterprise explanation for Japan but everyone does with China. Because of Chinese Law. While state help is necessary for companies to succeed that alone is not enough.
In the long term small improvements can enable innovation. But if you get stuck on coasting on laurels for a long time it leads to decline in innovation and especially motivation. And when I mean not only in releasing new products but also in manufacturing and other related areas.
When I picked up my DJI drone many years ago the amount of polish was top notch - hardware worked flawlessly, software was fast and without any glitch. I was looking for any signs like 'designed in Germany' or similar but nope, all Chinese.
People think about 3rd world countries and somehow end up thinking about the very definition of permanent incompetence - russia and its satellites. Like they still put chips from stolen wash machines into their ballistic missiles. When China is in comparison more like a humiliated, smart, deeply focused, hard working, ignoring some pesky human rights group of people who grokked well they don't need to bow to any foreign powers anymore if they focus and work hard on specific goals.
The US can do that too, it's not the ownership structure that is stopping them.
In fact, the US used to do a lot of that before the 70s.
If something happened to Xi and the party elected a hard nosed communist, China would unravel itself.
I don’t foresee the Party choosing someone more hardline than Xi, though. China has always been authoritarian, but collective ownership was new and an unmitigated disaster. They are too smart to go back that direction, although if they did, I could see that happening.
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.
Even recently, we've seen that all intel can do is increase cores and increase power consumption, and they still can't compete. This is itanium all over again, because that is how intel functions.
Intel's current chips are "fine" and competitive with AMD chips. If anything, Intel is trying out more things than AMD is.
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.
The government intervention of RR was nothing to do with the cars.
The original Rolls-Royce company, which included the car division, was nationalized by the British government in 1971 due to financial issues with its aerospace business.
The car division was separated in 1973.
The parent company, Rolls-Royce plc (nothing to do with cars), was sold to the public in a share offering in 1987, meaning it was no longer government-owned.
In 1998, BMW purchased Rolls-Royce Motor Cars.
Well, it is because you do not understand economy of business. Unfortunately, main goal of any business is to be viable, not mean profitable, just be good enough to pay expenses need to run things defined as goals.
By definition, ALL old automotive companies started as hybrids - car division to make profits and motors division to make use of outstanding knowledge gathered when making consumer cars (as highest technology of that time). There are nearly no exceptions - Daimler began as Daimler plus Maybach; BMW began as motorized vehicles garages production plus motors business; Renault began as aviation motors business, made automobiles to make additional cash.
When Rolls-Royce divided to aerospace motors and cars, it was already semi-dead business, because their aerospace behavior was non-viable without donations from car division.
To be exact, I don't mean, aerospace impossible to be viable, just RR was.
And returning to our ontopic, Intel was caught in same hole - they lost their superiority and cannot survive without external help, absolutely as RR business.
If Intel goes under, Taiwan becomes the battleground for WW3.
But core industries are just head of iceberg, you may not hear, typically 90% of iceberg are deep under water surface, very much like core vs non-core.
Any way, if large entity from core industry goes under, this could lead to killing domino effect for many "underwater" entities.
That is really big problem, which president Trump tried to avoid, when bought share of Intel.
And no, I disagree about battleground for now. What really important, really good strategists know, wars win by economy, not by military, as military could not withstand if they have not enough money for weapons and equipment.
So, basically, now US is stronger than China, so Chinese tops decide to not begin war which will not be profitable, while US is strong.
When and if China will feel competitive to US economically, they will be much more confident to begin war, so now the best what could do US tops to avoid war - to make China weaker and US stronger ECONOMICALLY.
and letting Federal Government in on this is sure to make this happen - just like everything else being ran by the Federal Government
Well, I don't like when something ran by Federal Government, but I have similar example: when somebody ill by flu, I don't like to use antibiotics, but sometimes must use antibiotics as fast measures to save life.
That is. Previous pro-semiconductor measures was not fast enough, and Intel was in real trouble and need to use something fast, and now we have bought time to do right but slow things.
Im also confused why you say China's inaction on Taiwan isnt about TSMC its about patience, but patience is running out because China wont need TSMC in 10 years. That seems to contradict itself.
Do you think an invasion of Taiwan brings risk of a new, worse status quo? I think that's primarily why China doesn't invade. If it were possible to just achieve an easy, total victory then there is no reason to wait for Taiwanese people to change their mind about joining China.
In my humble opinion, if China wanted to, they could win it now. China's vast resources and manpower will be overwhelming. Doesn't matter if they lose a few battles or takes a few years.The reason China doesn't want to is because they want a peaceful reunification. They want to wait when it's so obvious that Taiwan would lose and lose quickly that Taiwan simply gives itself up.
It's easy to grow very fast when you are starting from a very low base. Especially when you are chasing someone.
It's a bit like China's GDP per capita. If it continued growing at the same pace as between 2000 and 2020 it might have had a chance to catch up with US in a few decades or so from now. Certainly Western Europe.
Yet based on current trends they will never close the gap (then again who knows what will change in the next 10-20 years or so).
Of course demographic collapse is not that far either. US and Europe at least have immigrants propping them up.
China is patient. They seem to be taking a long term, intentional approach. Their goals are long term. In other words, they’ve been planting trees for decades and those trees are now beginning to provide shade. Americans, in the other hand are more concerned with their own self interest and the next financial quarter.
Without going into the lack of military capabilities to mount the largest amphibious invasion post-WW2 up until recently (debatable), I think you’d be hard pressed to find a group of people in the world that would be excited at the idea of being put under foreign occupation (not dissimilar to the “excitement” the Taiwanese had to be occupied by the Republic of China after WW2).
Regardless, TSMC wouldn’t survive annexation Taiwan being annexed by China in any capacity
Without the right people at the company, you can dump almost infinite money at a problem and still not solve it.
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.
That's a hard thing to sell in any environment.
If that data is correct, how did the US "extort" ownership?
Look, I'm as terrified of Trump's overreach as the next guy. I could easily see him extorting partial ownership of companies. But I don't see this as being that.
Can you make a convincing argument otherwise?
I don't think it's fair to characterize this as some kind of standard stock sale, as the terms were never set out as such from the start. (And to be fair, there are lots of valid criticisms of CHIPS)
Instead, funding was voted for by Congress... and then a third party came in, threatened to kill it on a dubious legal basis, and extracted protection money (well, shares). That's textbook extortion.
Normally when we pay businesses to do things we don't demand equity stakes in the businesses afterwards.
Notably, the biggest shareholders in Intel appear to be retirement funds of Americans - so Trump has just pilfered some money from the retirement accounts of Americans.
https://www.intc.com/news-events/press-releases/detail/1748/...
Also, socialism means whatever the ruling class says it means. For example in China they've redefined socialism to just mean nationalism, which is the opposite of the original intent. Read about "Xi Jingping Thought" and "Socialism with Chinese Characteristics". It seems when ideas like socialism become popular, they are co-opted and stripped of meaning.
In some investors view they were not.
> "The deal certainly has the appearance of the government clawing back the remaining portion of the previous grant, as the government is getting equity not previously contemplated for dollars already committed," Morgan Stanley analysts "The trade-off, in our view, is that the company will have the flexibility to optimize its own business model without commitment to public service objectives, which may or may not include foundry services at 14A as articulated on the last earnings call
https://www.investopedia.com/intel-stock-keeps-getting-a-boo...
Not sure how many times people will keep repeating this mistake assuming they won’t be hit up for protection money again later…
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.
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.
Unfortunately that seems far away.
Not like everyone can personally design a chip anyway, but if a small city has at least one fab it can be something in an emergency situation.
Recycling is probably a better solution here thought.
There are smaller fabs already
Other possibilities:
- Standard Circuit
- Standard Semiconductor
- Standard Microchip
Arguing against things being "left to the market" in the abstract is not sufficient to address the particular incentives that are producing undesirable outcomes, and does not offer any viable mechanism for shifting those incentives.
Specific proposals that attempt to operationalize what you're arguing here always seem to gravitate toward giving monopolistic power to a specific institution that invariably demonstrates that its own incentive structures are riskier than those in the broader market, and its failure modalities far more destructive.
Is the risk of a hospital closing for purely financial reasons more or less acceptable than the risk of a state-run hospital being inefficient but guaranteed to exist? For critical infrastructure, I think that's a conversation worth having, and it's one that hand-waving about an all-encompassing 'market' obscures; dismissing a legitimate critique by framing the market as an all-encompassing force is just a rhetorical move.
Your comment seems to suggest that any attempt to change the market results in unfavorable results, but this doesn't hold up to scrutiny. I think you replied with a valid philosophical point, but you leaned too much on using it to challenge that anything could be done (when you yourself presented the idea that a mechanism was needed).
There is no such unmanipulated free market anywhere:
Perfect Competition: In reality, we have monopolies, oligopolies, and immense barriers to entry.
Perfect Rationality: Behavioral economics has thoroughly demonstrated that people do not act like perfectly rational, self-interested computers.
Perfect Information: There is almost always a significant knowledge gap between a seller and a buyer.
Since no truly free market exists, every economy is already a managed one. The real debate isn't whether we should intervene, but how we intervene and whose interests those interventions serve. I read selimnairb's point as that, for essential services, the rules should serve the public interest of stability and access, not just the private interest of profit.
We can examine the risks case-by-case. Here, the government is investing in a foundry. We could view the leverage this gains the US government as increasing the risk for political engineering above the previous risk of financial engineering. In financial engineering, Intel might prioritize its obligation to shareholders. In political engineering (if Intel were nationalized), Intel might keep an inefficient fab open to save jobs or just to win votes.
In the category of financial engineering as a risk, you might lump activity like stock buybacks put above R&D as exemplar of Intel. In fact, a criticism of CHIPS and this new government intervention often centers around the idea that Intel's leadership should not be rewarded.
Finally, a related case on the topic of Intel and national security: China's state-directed economy prioritizes national goals over private profit. After entering "the market," part of its core strategy has been to compel service to national interests rather than shareholders, and it seems that strategy has arguably driven its recent economic rise.
Now I’m European so this seems obvious to me, coming from a culture of high government intervention but I might be very wrong!
We have already seen some pretty blatant insider trading moves from current government, so I wouldn't rule that one out. But its probably way more petty - chips and manufactured war with China is all the rage in media, we all still remember covid situation, so its an easy area to get some political points, while spending other's money.
Most European government interventions, like French literally taking ownership of their common car manufacturers aren't considered any sort of success story to emulate after.
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.
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.
> 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.
Just a hunch and I am really going out on a limb here but I could see China wait another year or two and then step in and force a peace settlement in Ukraine. This would really show the world who the new super power is, as the US and Western powers have struggled with this conflict, a patient China could step in and reach a peace deal as they hold significant leverage over Russia.
I also don't think Americans realize how quickly we will slide from relevance once our grip on the world slacks. We could have built this world into something amazing but instead we just got fat.
This is also the same trap that China is barrelling into right now and they will absolutely find themselves in the same position eventually.
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.)
Nationalizing companies - and that is essentially what we’re starting with Intel - worked out horribly for the Brits last century.
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?".
Holding significant stakes in domestic companies just seems like light state capitalism.
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?
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.
Did US govt. actually had an ownership stake in GM? Please provide some links to this effect.
The difference with Intel vs the banks, is Intel has assets that take decade plus to procure (foundries), and not something easily replaceable.
I think the US messed up big time in terms of national defense by not having some Gov program that does semiconductor manufacturing owned 100% from the start by the DoD. Now we need to do some grey area purchase of a failing company.
The republican game is to call democrats <insert_any_label_here> and then do the same thing they allege democrats do.
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.
Intel needs a major shakeup, it has been brewing for a long time, but coffers were too full. Cushion is gone now, urgency is now understood by everyone; now it takes a visionary and some successful execution, for once.
If you say corruption is the difference, maybe - but I wouldn't be so pessimistic... yet.
https://docseuss.medium.com/the-biggest-threat-facing-your-t...
That brings up an interesting point. It seems to be a conventional wisdom that centrally planned economies don't work (and did not work in cases where they were tried) as well as Western-style capitalism because of the communication and command bottlenecks.
But what if those bottlenecks have been greatly increased in the information age of Internet, other global communication networks, and data collection? The western-capitalist system has the problem of getting stuck in local minima, being driven as a network of actors. What if the downsides of that are finally greater than the performance hit due to central planning bottlenecks?
The US government never gave bailout and gifts to Intel. The original agreement was profit-sharing with Intel through the CHIPS act is standard with any business wanting the funds. All Trump did specifically for Intel was alter the deal to be an equity stake instead, which will still only be beneficial is Intel is profitable.
Your entire comment is faulting on this premise. Please stop spreading this lie.
Blaming real-world problems on nominalized abstractions is quite unhelpful, especially when those abstractions are all-encompassing ones like "capitalism" or "financialization" which mostly represent patterns of behavior that have always been present.
Identifying specific shifts in incentives or intentions that resulted in different motivations or intentions becoming dominant is difficult, but there's really little point in engaging these conversations without at least making an attempt to do so.
> 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.
"Corporatism" is collectivism, and much of the critique of these kinds of interventions stems from the correct recognition that political incentives (a) are deeply entwined with commercial ones, not a counterbalance to them, and (b) often have even worse failure modalities than prevailing economic incentives.
And where is the example of a successful govt run business?
Why dont we encourage businesses here w free trade zones?
>How is this ‘equity stake’ different than nationalization?
Ownership scope and control. A nationalized company is owned and run by the government. This equity stake is the US buying stock in Intel instead of issuing the money as grants. I would agree this creates conflicts of interests for both parties. And that it shouldnt happen. But this is wildly different than nationalization.
> And where is the example of a successful govt run business?
This is a bit of a loaded political question until you first define "success" and "business". Most of the reasons you'd even want a company to be run by the government in a mixed-market economy are precisely because you want it to be run differently than a private company.
And where is the example of a successful govt run business?
USPS, TVA, Paris Metro...
I know many are irrationally scared of the S and C words, but this ain't it.
If you look at the list of largest companies by revenue [1], 4 of the top 6 are state-owned. (I'm not saying I support this move by Trump - and natural resources are probably different than technology, etc.. But just to answer the question).
[1] https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...
This isn't unprecedented - I think Trump really set the tone with TRUMPcoin saga, which was very wild-west. a lot of people lost money, and others got awfully wealthy in a flash. but ultimately, it was legal: both winning, and losing.
Then you had Trump dipping the S&P and telling everyone "nows a great time to buy!", which IMO was even more diabolical than the trumpcoin stuff.
I think the signal is clear: the concept of "securities fraud" has become the financial equivalent of arranged marriage & dowries, and in its place we welcome the "free & open market", double edged and all.
hold it carefully or you'll cut yourself!
like it or not it seems to be working. the wealth disparity between the US and everyone else is growing (to the US favour). I think if the US starts arguing 'youre either with us or against us', most people today will go full FOMO into the US - even the most ardent patriots will quietly shift all their assets into the US side.
now we hear that Trump will allow 600k Chinese students to study in the US - has there ever been a greater inditement against the CCP? What does it say about the "Chinese Century", when their brightest minds are clamouring to get into Stanford or MIT?
Pax Americana for yet another century, I'm all in.
> 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!!
Please don't use Hacker News for political or ideological battle. It tramples curiosity.