Covered yesterday on YC.[1]
> Covered yesterday on YC.[1]
> [1] https://news.ycombinator.com/item?id=44989773
The post from yesterday was news; this is commentary, as in, not a dupe.
To your point, it's arguably closer to state capitalism, which may be a distinction without a difference if you paint it with the same brush as socialism, but it's one worth mentioning.
https://en.wikipedia.org/wiki/State_capitalism
The name of the (sub)site we're posting on is HN; YC is the host. :P
Eventually those were privatized. Now, the railroads are being socialized again.
China is trying to beat US at its own game. US (or at least its current political leader) is trying to beat Russia at its own game. Russia is trying to remain relevant. Russia is the muscle, China is the finance.
China needs Russia just like Google (Chrome) needs Firefox. Without Russia around, China would get all of the attention instead. Without Firefox existing, Google would have no counter to antitrust allegations in the web browser space.
Anything you can do, I can do better. I can do anything better than you.
No, not like that!
It's like that Spider-Man meme where everyone is Spider-Man pointing their fingers at each other. All the power structures are mirroring each other. It's all kayfabe, all the time. Everything is wrestling.
https://www.nytimes.com/2016/05/27/magazine/is-everything-wr... | https://archive.is/muwUp
The chip fab industry builds billion dollar bespoke superfund sites, and they're paid for the privilege.
https://www.jstor.org/stable/j.ctv65swcp.5 | https://doi.org/10.2307/j.ctv65swcp.5
The US government doesn't need leverage. It just needs an act of Congress. Corporations are convenient fictions that exist at the pleasure of our legal system, which can be changed.
https://en.wikipedia.org/wiki/State-owned_enterprises_of_the...
US federal government is the biggest player in healthcare, by far. 32% of all healthcare spending is Federal government dollars. They have plenty of leverage. Bad if they use it, but they have it.
$900+ billion in Medicare yearly $600+ billion in Medicaid yearly
What would the value add for either party be?
Now only companies are left to pick up the bill, because a republican administration won't ever consider doing it.
I still wonder when CEOs will realize that lack of education and lack of healthcare will eventually land at their doorsteps because they won't have immigrant workforces anymore that can compensate for it.
If you say 'I like Capitalism', a significant minority will hear 'I love US imperialism and hate nature', despite that almost certainly not being what you meant. Similarly, if you say 'I like Communism', many hear 'I love dictators, gulags, 5 year plans and famine'.
A word of advice: if you actually want to have valuable political conversations with people, don't start by identifying yourself with ideology that's arguably responsible for various atrocities and millions of deaths.
So neither capitalism nor communism? What's left, anarchism? I guess they haven't killed that many people.
Talk about policies and their effects, not about what bucket you might put them (and yourself) in.
Moving on from that, you make a good point that it may be the best compromise if the original deal is off the table. That said, in my eyes the implementation could be better. On both a practical and ideological level, I think it would behoove the dealmakers to lay out clear exit conditions. That could look something like anything from signing a covenant with Intel to freeze dividends and corporate buybacks and pay down debt (which is dangerously high for them currently), and then once the corporate balance sheet gets to a safer level, the US gov could run a public auction for the equity once that strike level is hit. I'm sure they could come up with something palatable. What's unexcusable is to apparently enter into a seemingly permanent zone of CCP-style state corporate capitalism without clearly laying out what that means for America going forwards. As an average citizen, I certainly have questions about the precedents being set, and to me it just looks haphazard and off-the-cuff.
The only absurd here is to think republicans care about anything other than power . Doesn't matter what they did or said yesterday, what matters is what can they say and do today to remain in power and enable their deep pocketed donors to make more money and gain more power.
People really have to stop thinking there's anything there, there's nothing, its all about acquiring and using power. Trying to come up with ideological reasons as to why they do this or that is useless.
Right, but it's an absurd juxtaposition when taken at face value none the less. I agree with what you said, but my point was more about other possible structures for the deal rather than political conclusions. I was attempting to brush aside the political considerations and take a somewhat tabula rasa approach, not spur a partisan political conversation, which clearly I failed at by mentioning the absurdity in messaging.
Perhaps I should have nixed the political aside at the top. Wasn't my intent to bring that to HN.
The GOP overthrew its leadership in 2016 and a different faction took control of the party. The GOP started out as an economically interventionist party: https://www.journalofthecivilwarera.org/2017/04/gops-civil-w.... Then it went through a libertarian phase in the mid 20th century. Now its back to an economically interventionist party.
Also consider: Who is the $10 billion coming from? Because it's not Intel. Intel just prints the shares out of thin air. This is Trump stealing $10 billion directly from Intel's shareholders, who get nothing in return because Trump is legally required to disburse the CHIPS Act money.
A person invests in a stock, hopes it goes up, and makes a profit (or loss) when they sell. That money isn't real until a sale occurs.
A government gives a grant and gets a return tomorrow and every single day of the company's existence as well as every single day each employee exists (even if the company doesn't). If a company exists, it pays corporate taxes. If that company has employees (as every company does), it pays payroll taxes. If that company has employees, they pay income taxes and various forms of consumption taxes.
IDK why we act like a grant is akin to lighting money on fire. Governments don't give out grants for nothing. They're still benefiting from it. Sure, the vehicles for return are different from a standard investment but also a government isn't a person. Well I should take that last part back. A government is a person in an autocracy (monarchy/dictatorship/theocracy/etc), but that shouldn't even be on the table.
I wish that were so.
It's also just crazy to see nationalization being packaged as capitalism. Those screaming for privatization while nationalizing. It's not even being done covertly either
It was never a nothing-in-return agreement, that is fiction.[0]
[0] “Biden to require chips companies winning subsidies to share excess profits” >> https://www.reuters.com/technology/us-require-companies-winn...
> if your company is profitable post expansion funding then you will profit share with the federal government.
I mean I agree with you but even that article is talking about how it's not a free handout. It never could have been. A government could hand out money unconditionally and they'd still get a return as long as taxes exist. Intel's (or any company's) success results in them paying more taxes. Not just corporate taxes either.
Seems like a bad combination to me, a net positive tax payer.
Everyone benefits from more medicine, weapons, food, etc.
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...
That and when most governments "nationalise" corporations they seize them and don't give the owners/shareholders anything.
First you get the money, then you get the power.
Money is fungible, but power isn't. Arguably, taking away my power is an affront to my human rights. Taking my money is an affront, but it never was my money to begin with, as I don't control the value or creation of it. My rights are inalienable.
Versus in most nationalisation events their shares simply get taken away or diluted to pennies.
And it's the standard refrain: if this money helps Intel get back on its feet, the stock price will go up, presumably to the point dilution won't matter.
But who cares, really? If it's true that Intel is actually strategically important to the US, the shareholders are irrelevant if need be. It's not a great outcome, sure, but Intel has been mismanaged for a long time, and investors should have known the risks of investing in a company like that.
https://www.intc.com/news-events/press-releases/detail/1748/...
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...
This means the market believes they have a path to bankruptcy. Since markets are forward looking, how close it is to bankruptcy does not matter too much. In this case they needed money and the government provided a relatively low amount for a pretty significant stake in the company.
The reality is any government (USG included) getting 10% share ownership in a company is ... barely news. The more interesting news (or speculation) is whether this is a smart move or not.
Intel the advanced IC manufacturer is worth effectively nothing right now.
If they can prove a successful advanced manufacturing process and start making chips on it that will likely reverse fairly quickly, but it's been a decade since they held fab leadership.
>The Canada Development Corporation was a Canadian corporation, based in Toronto, created and partly owned by the federal government and charged with developing and maintaining Canadian-controlled companies in the private sector through a mixture of public and private investment. It was technically not a crown corporation as it was intended to generate a profit and was created with the intention that, eventually, the government would own no more than 10% of its holdings; it did not require approvals of the Governor-in-Council for its activities and did not report to parliament. Its objectives and capitalization, however, were set out by parliament and any changes to its objects decided upon by the Board of Directors had to be approved by parliament.
The CDC was created as a result of Walter Gordon's Royal Commission on Canada's Economic Prospects, and the 1968 Watkins Report commissioned by Gordon, in an attempt to redress the problem of foreign ownership in the Canadian economy by stimulating the development of Canadian owned corporations, particularly in the field of natural resources and industry
About 31,000 private shareholders invested in the corporation. An early purchase of the corporation was Connaught Laboratories, the original manufacturer of insulin.
Major investments owned by the CDC included holdings in petroleum, mines and petrochemicals including Polymer Corporation, an asset transferred to it by the Canadian government. By 1982 the Canadian government had a 58% stake in the Savin Corporation.
In 1986 the Corporation was dismantled as part of the Mulroney government's program of privatization.
https://en.wikipedia.org/wiki/Canada_Development_Corporation
But in reality, they gave up on R&D, Missed Apple mobile chips and then put a lot of MBAs in top leadership positions to make their financial schemes work. Those schemes did not work and they were left without technical leadership. When they got the tech leadership, the board just gave up and fired him and brought in a chop shop CEO to part intel out.
For some reason, the US admin thinks this is a good buy. You probably would too, if you bankrupted multiple casinos.
Intel is going the way of SunBeam, Sears and Toys r Us. The board failed to stop that. And failure attracts more failure.
Has it ever worked?
Having to do any kind of 2025 type of work on it would be testing my patience to the extremes because all SW and media has grown in size and/or complexity(AV1 encoding, etc) requiring faster CPU, GPU, storage and RAM for the optimum experience. The only things that run fast on it are period accurate Linux 2.6 and Windows XP, but I wouldn't call that modern computing.
Computers have gotten night and day faster and especially more efficient since 2008, saying otherwise would be in bad faith.
Itanium was a flop from bad business decisions IIRC. Note too that x86-64 was developed by AMD, and Intel licensed it from them.
Itanium was a flop from a technical standpoint but not from a business one. Intel spent roughly a gigabuck and effectively scared every competitor out the pool except for IBM and AMD.
Intel is suffering because their old fab folks all retired, and no young, smart engineer over the last 20 years wanted to work for any semiconductor company let alone Intel.
Even without the Itanium, the economies of scale in the x86(-64) world would have driven the RISC vendors out of the game.
1. IBM picked the 8088 for the PC platform. This was part luck, part Motorola being too slow to market with the 68k.
2. The first PC with an 80386 was made by Compaq, not IBM.
3. A big part of what held OS/2 1.x back was IBM insisting on it working with the 80286, which made properly supporting DOS programs challenging. OS/2 2.0 came out 6 years after the first 386 based machine from Compaq.
> could not generate sufficient revenue to pay back the loans
Governments aren't people. If I gift you money, that money doesn't come back to me. But if a government gifts someone money, it makes its way back. As long as that money gets spent, there's returns. Even if you die, and even if you don't have that $14m for the death tax, that money still pays dividends back.
The only way it doesn't is if the economy crumbles or that money is taken out of the entire economy (which is much harder to do considering the dollar being the current global currency). So basically you need to light it on fire.
You can do things to slow that flow but it does come back. A low interest loan is just increasing that flow and this is why a negative interest rate can still generate a return. A company can fail and there'd still be returns through taxes in the mean time. The money doesn't just evaporate.
I think a lot conversations about money get weird because we over generalize what money means, applying money's context for an average person more broadly. But money has a very different context when you're talking about governments, corporations, or even billionaires (due to the shear amount). Nor are those examples the same either.
In this case I think it matters. The government already has a stake in Intel, and in all companies. Shares only decrease the pie available to the public while increases the ability for government official to do insider trading and increases nationalization.
They intervened to maintain the status quo. Industries are neither stable or unstable for a long period of time without external influences forcing that outcome. Short term turbulence is to be expected and is beneficial for the market as a whole.
They destroy markets and then lie to your face about it.
> industries remained solvent.
How does an _industry_ become insolvent? Only when it's nearly fully monopolized and when there is no difference between an industry and a single entity. This is where we are currently.
> more shares at their current market price to the government in exchange for cash to continue business operations.
Couldn't they just offer those shares to _any investor at all_? Why is the government special here?
> https://chicagopolicyreview.org/2022/08/23/piece-of-the-acti...
Of course. Chicago school thinking. It's infected our country for decades now. Certainly not to the benefit of it's citizens.
Look at the end state of the US auto industry. It's uncompetitive in basically every part of the world and thus basically irrelevant, except in the US. Unless somehow something different is going to happen here, this could end up with Intel continuing to perform poorly, negating the point of keeping it alive to begin with.
This Darth Vader style "I am altering the deal, pray I do not alter it any further" gambit is new to the best of my knowledge. If the CHIPS Act had been structured so that it was equity purchases that would be one thing.
“The Chips Act wasn’t about raising revenue, and an equity share wouldn’t enhance national security.”
Every generation of fab is increasingly expensive. TSMC has over 500 customers, including Intel. Intel basically only has Intel to pay for those $20 billion fabs.
We nationalised passenger rail in the 60s.
But you also have to consider whether the government has the legal authority to make the investment. For a country claiming a limited government and the rule of law, that is a serious consideration.
You seem to be focused on the first consideration, but do not overlook the second one.
I'll be blunt - I don't think anyone takes either of those seriously, not since Wickard v. Filburn in 1942.
GeekyBear gives a less blunt similar argument: https://news.ycombinator.com/item?id=45008439
Chinese large scale investments are a bit different. It’s not just SMIC who gets a lot of funding, but others as well, so they can still compete with each other, until the winner is chosen and the others fade away. Similar to what is happening in EV market in China.
Intel… there is a decent chance that company fails even after this investment. They basically need to force other companies to use Intel chips instead of competitors for them to be viable at some point.
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?
the supply chain moved to asia and the just so stories about ricardian free trade + an inflated stock market made everyone believe, while the ultra-rich got ultra-ultra-rich
and now we sit down to our banquet of consequences
Missed on: mobile, custom chips in the data center, graphics cards, ai, and building out fab services they can sell.
Meanwhile, they took at least 5 years off of making their chips faster, and we're treated to the absurdity that the m-series chips are as performant in single core as anything Intel can build on a power budget 1/10th of Intel's.
I'm not sure what that has to do with outsourcing? It looks more like a comprehensive lack of execution.
High-end fab is a volume game and that was the time frame when Intel was still process competitive and could have competed for Apple's business (and Nvidia's, ...). But that would never happen as a division of Intel, nobody wants to send their designs to a competitor.
The problem is that these days they do it capriciously, without any sort of plan or intention.
The government played a foundational role in supporting the early stage research that enabled companies like Intel to emerge. Underwriting that sort of long-term investment that wouldn't easily attract commercial capital is a great place for them to be.
Meanwhile, is it even the case that the American chip industry is declining? Apple, Nvidia, and Google all have significant chip manufacturing operations. And this isn't an industry I even follow particularly closesly.
No, they all (as well as AMD) all have significant chip designing operations. Not one of them can actually fabricate their own chips. Every single one of them must speak to TSMC or Samsung if they want to take their designs from the whiteboard to the physical world.
Wafer fabs are capital intensive, complex, and need constant retooling. The bulk of the commercial value lives in the stuff you do on your whiteboard.
From a geopolitical standpoint, I'll concede there's value in having the ability to actually make the stuff without acceding to the duopoly. But I'd still rather see the capital invested in basic research which might change the capital dynamics of the industry in the intermediate to long term.
Government should own a stake in every business, and citizens should then get shares in that government fund.
I'm not in either camp at the moment, as I don't have a deep understanding of Intel or its finances, but I'm tired of people whining about how others could possibly have a different opinion about two similar but different events, separated by nearly two decades, as if this is some sort of "gotcha!" moment. It's not. Move on.
But even if -- let's just say if -- this Intel bailout were identical to the bank bailouts in every way... priors matter! Even someone who agreed with Bush back in 2008 that the bailouts were necessary, someone who was largely in agreement with much of what Bush did during his presidential terms... that person could very much disagree with what Trump has done in the past 7 months (as well as what he did 2017-2021), and that disagreement makes it entirely reasonable to question whether or not this particular move is a good decision. That's just... entirely normal.
If 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's capitalism when you're winning, and socialism if you're losing.
Or: "Privatised profits, socialised losses".
I understand why in this case, Intel is very much in bed with the US Government and likely makes a strong case for being a national security interest, but it feels icky.. especially as AMD is an American company too.
If the issue is the node fabrication then why wasn't their an investment in Fabs before now? Intel got its big start on government grants iirc.
Not sure where I read that (I think it was some dude's Tweet), but it seems relevant here.
Maybe there are better ways to prop up Intel besides the government taking a stake, but losing Intel would be a huge blow to American manufacturing interests. There's been a failure of strategic vision, both at Intel and in the American government. I think as a short term measure, taking a stake isn't the worst thing the government could do at this time.
Also to go off on a tangent a bit: this is one of the benefits of having a Trump-like character as President; he's clearly not beholden to any ideology and is extremely flexible when it comes to making policy decisions, even when a certain policy might be more at home with the opposing party or side of politics.
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