I would agree with your approach if we were simply discussing whether the government should fund intel, but we’ve already committed to funding intel via the government. Pulling back would hurt intel and our interests. Now that intel has become reliant on our promised funding, it makes sense to attach conditions to the funding we need to do instead of just handing it out while getting nothing in return.
I wonder if the libertarians and the socialists are already clashing behind the scenes. Trump struck me as the latter and his vice president as the former.
So should the government give bailouts without getting any equity back? Only deal in loans?
Intel is strategically important. As nice as it is to pretend that the whole world plays by the same rules, that the free market exists everywhere and that we'll never to to war, there are bad actors and the US (rest of the collective West as well) need to ensure that we won't be completely crippled if China attacks a single island off their coast...
typical tech bro - they don't want any government regulation and want all the federal dollars they can get for nothing in return. we shouldn't be giving tax payer money to any private or public profit driven corporation ever. Mind you that's also a libertarian principle but tech libertarians always leave that part off.
Didn't we already cross this particular Rubicon during the auto bailout a decade ago?
Other examples:
> Since the 1950s, the federal government has stepped in as a backstop for railroads, farm credit, airlines (twice), automotive companies, savings and loan companies, banks, and farmers.
Every situation has its own idiosyncrasies, but in each, the federal government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have left the average taxpayer much worse off. In some instances, the treasury guaranteed loans, meaning that creditors would not suffer if the relevant industry could not generate sufficient revenue to pay back the loans, leading to less onerous interest rates.
A second option was that the government would provide loans at relatively low interest rates to ensure that industries remained solvent.
In a third option, the United States Treasury would take an ownership stake in some of these companies in what amounts to an “at-the-market” offering, in which the companies involved issue more shares at their current market price to the government in exchange for cash to continue business operations.
Each example industry continues to require some sort of government intervention to remain solvent at one point or the other. Auto/banks/saving and loans getting bailouts in 2008/2009. Airlines in 2020/2021 due to COVID etc. These industries employ a lot of people and now have become a political hot zone for voters so there is no way to remove these backstops now.
And whether these industries remain competitive globally is another question. Because it is always funny to hear countries accuse each other of propping up one industry or other through government intervention.
Second, these were industry wide bailouts. This action is not.
The genesis of CHIPS Act is a 2020 deal to onshore TSMC. The idea was to further persuade Samsung and Intel to produce chips in US through tax benefits, loan guarantees and grants. But now with US taking a stake in Intel, the strategy for onshoring TSMC and Samsung becomes unclear. Maybe the idea is to use tariffs to make TSMC and Samsung uncompetitive if they don't onshore but that is a bad idea. Because if Intel finds it easier to just coast on "national security" and continue producing last gen chips, they are going to do that and lower innovation even more. This is a win-win for Intel though.
Of course the WSJ is against anything even vaguely gesturing towards nationalization, how could this possibly be considered a reputable source for info on this topic?
Governments owning stocks feels like double dipping with a touch of socialism.
I get why the idea seems sane, you want to get returns on investments, right? But with governments the vehicle for returns is taxes and investments are often called "grants" (but also loans, credits, etc). The tax system means you can make investments and always get some return. FFS you could invest in a company going nowhere and you still recoup through taxes. The only way you lose in this system is by tanking the entire economy. Idk why this is so hard to understand. Why people think things like research grants is akin to tossing money into a pit and burning it.
I know the current party is anti tax but aren't they also anti nationalization (Words, not actions)? Changing (or adding) your returns vehicle to be through stock only creates nationalization. It increases returns but also puts an additional thumb on the scale. It's very short sighted.
Who knew socialism would come to America wrapped in an A̶m̶e̶r̶i̶c̶a̶n̶ capitalism flag?
Governments make regulations that command how companies operate and take taxes from companies. Governments already own significant stocks of companies in all but name.
If you make targeted grants, rebates, subsidies, etc, it even seems more fair to make taxing also targeted.
And is giving Intel subsidies and making Intel pay for it more socialist than giving Intel subsidies and making everyone pay for it?
this is the logical conclusion of outsourcing: we kept giving away the low end electronics and now we can't compete on the high end w/o government subsidy
the supply chain moved to asia and the just so stories about ricardian free trade + an inflated stock market made everyone believe, while the ultra-rich got ultra-ultra-rich
and now we sit down to our banquet of consequences
It's more that one of the talking points of the political right in the us is that socialism is bad, while the state owning means of production is a key idea of socialism. So Trump making this happen is very ironic.
TSMC was funded by government. The cost requirement for new fabs is beyond the funding private enterprises can muster. Perhaps through funding, years down the road, it may make sense. This isn't about Intel IP, it's about manufacturing high end chips on US soil.
The problem here isn't that the government gets involved in businesses. That has always been something they do.
The problem is that these days they do it capriciously, without any sort of plan or intention.
The government played a foundational role in supporting the early stage research that enabled companies like Intel to emerge. Underwriting that sort of long-term investment that wouldn't easily attract commercial capital is a great place for them to be.
Meanwhile, is it even the case that the American chip industry is declining? Apple, Nvidia, and Google all have significant chip manufacturing operations. And this isn't an industry I even follow particularly closesly.
Intel is definitely special in that it's the only truly American fab.
I don't have a problem with a US government owning a stake in Intel given its massive strategic importance, but I have a problem with this government owning a stake in Intel given its brazen corruption.
The handwringing over Trump continues and is completely unwarranted. Obama bailed out the entire banking industry to horrifying moral hazard. The US is bailing out Intel for national security reasons and taking a 10% stake is a better deal for US taxpayers than how typical bailouts like GM played out. Sheesh! It's like you can't even read a news story these days without seeing the anti-Trump bias programmed into the article.
So maybe 50/50 that the top of the pyramid doesnt just take the free printed money and keep running the company into the ground.
If they pass that hurdle, its more like 70/30 Dump says put backdoors into all processors, and says it loud and proud. Assuming intel is smart enough to be able to fuse that functionality out entirely (not that anyone would believe they disabled the functionality)... That leaves somewhere about 15% chance that Intel survives 5 more years
> Unlike grants, equity comes at a steep cost to Intel. Transferring grants into equity therefore risks putting Intel at a cost disadvantage relative to other chip makers
A lot of this article seems to rely on this point but the possible cost isn't clarified. I can understand equity arrangements affecting shareholders but how would it reduce the product's competitiveness, notably the unit cost which seems to be the point regards to other chipmakers. If it's about stock price going down, employee comp going down and product effects from that, it seems too speculative?
On the flip side, it sounds like instead of cash over time it becomes a lump cash infusion, which seems like it could result in benefits of its own such as bringing forward timelines.
<< how would it reduce the product's competitiveness
It wouldn't. It is an opinion piece. On that basis alone, knowing what we know about media landscape, it exists as a means of forming opinion and allowable argumentation for the issue at hand.
If that premise is accepted then the piece is there to protect the poor shareholders, who until now were thinking Intel will be getting 'free' government money, but suddenly found the cost of government involvement may be higher. Suddenly, that is a bridge too far. You can grant them money, but, good heavens, think of what you will do if you demand that we give you equity of said money..
I mean.. sure WSJ intended audience, who is bound to nod on 'productivity' line of argumentation, but people with a sense of Intel history ( or most US industries that offshored and now talk reshoring for that matter ) might chuckle at the hutzpah.
It's capitalism when you're winning, and socialism if you're losing.
Or: "Privatised profits, socialised losses".
I understand why in this case, Intel is very much in bed with the US Government and likely makes a strong case for being a national security interest, but it feels icky.. especially as AMD is an American company too.
If the issue is the node fabrication then why wasn't their an investment in Fabs before now? Intel got its big start on government grants iirc.
If Intel's stock goes up then the government can sell their shares to make money beyond what they'd get from taxes. Socialized losses would be like free money via grants while getting nothing in return, so this form of taking ownership of a company is strictly more capitalist, namely state capitalist like some countries around the world.
64 comments
[ 2.8 ms ] story [ 76.7 ms ] threadCovered yesterday on YC.[1]
[1] https://news.ycombinator.com/item?id=44989773
Nvidia/AMD offer 15% profits
Intel offers 10% share
I think, as a TV star, Trump enjoys all the circus. And everyone else is playing along so it's fun.
Intel is strategically important. As nice as it is to pretend that the whole world plays by the same rules, that the free market exists everywhere and that we'll never to to war, there are bad actors and the US (rest of the collective West as well) need to ensure that we won't be completely crippled if China attacks a single island off their coast...
Fab capability on US soil is strategically important. Intel is one of many possible routes to that.
Other examples:
> Since the 1950s, the federal government has stepped in as a backstop for railroads, farm credit, airlines (twice), automotive companies, savings and loan companies, banks, and farmers.
Every situation has its own idiosyncrasies, but in each, the federal government intervened to stabilize a critical industry, avoiding systemic collapse that surely would have left the average taxpayer much worse off. In some instances, the treasury guaranteed loans, meaning that creditors would not suffer if the relevant industry could not generate sufficient revenue to pay back the loans, leading to less onerous interest rates.
A second option was that the government would provide loans at relatively low interest rates to ensure that industries remained solvent.
In a third option, the United States Treasury would take an ownership stake in some of these companies in what amounts to an “at-the-market” offering, in which the companies involved issue more shares at their current market price to the government in exchange for cash to continue business operations.
https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...
We nationalised passenger rail in the 60s.
I guess we'll never know what would have, no matter how sure you seem to be.
I, for one, am still a little bitter about what could have been if not for a couple of those bailouts.
Each example industry continues to require some sort of government intervention to remain solvent at one point or the other. Auto/banks/saving and loans getting bailouts in 2008/2009. Airlines in 2020/2021 due to COVID etc. These industries employ a lot of people and now have become a political hot zone for voters so there is no way to remove these backstops now.
And whether these industries remain competitive globally is another question. Because it is always funny to hear countries accuse each other of propping up one industry or other through government intervention.
Second, these were industry wide bailouts. This action is not.
The genesis of CHIPS Act is a 2020 deal to onshore TSMC. The idea was to further persuade Samsung and Intel to produce chips in US through tax benefits, loan guarantees and grants. But now with US taking a stake in Intel, the strategy for onshoring TSMC and Samsung becomes unclear. Maybe the idea is to use tariffs to make TSMC and Samsung uncompetitive if they don't onshore but that is a bad idea. Because if Intel finds it easier to just coast on "national security" and continue producing last gen chips, they are going to do that and lower innovation even more. This is a win-win for Intel though.
(Now they can meet their end by footshoots like removing the turn signal and drive select stalks)
I get why the idea seems sane, you want to get returns on investments, right? But with governments the vehicle for returns is taxes and investments are often called "grants" (but also loans, credits, etc). The tax system means you can make investments and always get some return. FFS you could invest in a company going nowhere and you still recoup through taxes. The only way you lose in this system is by tanking the entire economy. Idk why this is so hard to understand. Why people think things like research grants is akin to tossing money into a pit and burning it.
I know the current party is anti tax but aren't they also anti nationalization (Words, not actions)? Changing (or adding) your returns vehicle to be through stock only creates nationalization. It increases returns but also puts an additional thumb on the scale. It's very short sighted.
Who knew socialism would come to America wrapped in an A̶m̶e̶r̶i̶c̶a̶n̶ capitalism flag?
If you make targeted grants, rebates, subsidies, etc, it even seems more fair to make taxing also targeted.
And is giving Intel subsidies and making Intel pay for it more socialist than giving Intel subsidies and making everyone pay for it?
the supply chain moved to asia and the just so stories about ricardian free trade + an inflated stock market made everyone believe, while the ultra-rich got ultra-ultra-rich
and now we sit down to our banquet of consequences
The problem is that these days they do it capriciously, without any sort of plan or intention.
The government played a foundational role in supporting the early stage research that enabled companies like Intel to emerge. Underwriting that sort of long-term investment that wouldn't easily attract commercial capital is a great place for them to be.
Meanwhile, is it even the case that the American chip industry is declining? Apple, Nvidia, and Google all have significant chip manufacturing operations. And this isn't an industry I even follow particularly closesly.
I don't have a problem with a US government owning a stake in Intel given its massive strategic importance, but I have a problem with this government owning a stake in Intel given its brazen corruption.
If they pass that hurdle, its more like 70/30 Dump says put backdoors into all processors, and says it loud and proud. Assuming intel is smart enough to be able to fuse that functionality out entirely (not that anyone would believe they disabled the functionality)... That leaves somewhere about 15% chance that Intel survives 5 more years
A lot of this article seems to rely on this point but the possible cost isn't clarified. I can understand equity arrangements affecting shareholders but how would it reduce the product's competitiveness, notably the unit cost which seems to be the point regards to other chipmakers. If it's about stock price going down, employee comp going down and product effects from that, it seems too speculative?
On the flip side, it sounds like instead of cash over time it becomes a lump cash infusion, which seems like it could result in benefits of its own such as bringing forward timelines.
It wouldn't. It is an opinion piece. On that basis alone, knowing what we know about media landscape, it exists as a means of forming opinion and allowable argumentation for the issue at hand.
If that premise is accepted then the piece is there to protect the poor shareholders, who until now were thinking Intel will be getting 'free' government money, but suddenly found the cost of government involvement may be higher. Suddenly, that is a bridge too far. You can grant them money, but, good heavens, think of what you will do if you demand that we give you equity of said money..
I mean.. sure WSJ intended audience, who is bound to nod on 'productivity' line of argumentation, but people with a sense of Intel history ( or most US industries that offshored and now talk reshoring for that matter ) might chuckle at the hutzpah.
It's capitalism when you're winning, and socialism if you're losing.
Or: "Privatised profits, socialised losses".
I understand why in this case, Intel is very much in bed with the US Government and likely makes a strong case for being a national security interest, but it feels icky.. especially as AMD is an American company too.
If the issue is the node fabrication then why wasn't their an investment in Fabs before now? Intel got its big start on government grants iirc.