“We will not be anywhere near as focused on buybacks going forward as we have in the past”: Intel’s new CEO.
By Wolf Richter for WOLF STREET.
US semiconductor manufacturing has declined to where it is now only 12% of the world’s total, said Intel’s new CEO Pat Gelsinger in an interview with CBS on 60 Minutes. “And anybody who looks at supply chain says, ‘That’s a problem.’” It’s a problem, he said, “because relying on one region, especially one as unpredictable as Asia,” where 75% of the chips are made, “is highly risky.”
And Intel, which made $63 billion in net income over the past three years combined, “has been lobbying the US government to help revive chip manufacturing at home – with incentives, subsidies, and-or tax breaks, the way the governments of Taiwan, Singapore, and Israel have done,” Gelsinger said. This lobbying came after Intel had incinerated $84.5 billion in share buybacks since 2011 (data via YCharts):
The success of Intel’s lobbying became clear in late March when the White House unveiled $50 billion in subsidies for semiconductor makers in the US to address the shortages and US exposure to foreign chip makers, as part of its $2 trillion infrastructure plan. The subsidies for the semiconductor industry have bipartisan support in Congress, the White House said. Corporate subsidies have nearly always bipartisan support.
In March, Intel had announced plans to invest $20 billion in chip-making plants in Arizona. In the interview, Gelsinger said that Intel would also invest $3.5 billion to upgrade its plant in New Mexico.
But Intel’s share buybacks are getting trimmed: CBS confronted Gelsinger with the fact that Intel had spent “a lot more” on share buybacks than on research and development, whereupon he said: “We will not be anywhere near as focused on buybacks going forward as we have in the past. And that has been reviewed as part of my coming into the company, agreed upon with the board of directors.”
Upon the news, Intel’s shares [INTC] fell over 1% this morning.
And he admitted out how far Intel has fallen behind technologically. “For chips with the tiniest transistors – there is no ‘made in the US.’ option. Intel currently doesn’t have the know-how to manufacture the most advanced chips that Apple and the others need,” he said.
“The company stumbled,” he said. “We had some product stumbles, some manufacturing and process stumbles. Perhaps the biggest stumble was in the early-2000s, when Steve Jobs of Apple needed chips for a new idea: the iPhone. Intel wasn’t interested. And Apple went to Asia, eventually finding TSMC: the Taiwan Semiconductor Manufacturing Company – today, the world’s most advanced chip-manufacturer, producing chips that are 30% faster and more powerful than Intel’s,” he said.
“We believe it’s going to take us a couple of years, and we will be caught up,” he said.
TSMC, the world’s largest contract chipmaker, including for Intel, and a large supplier of chips to the automotive industry, said a couple of days after Intel’s $20-billion announcement in March that it would spend $100 billion over the next three years on R&D, on upgrades, and on a new plant in Arizona where it will produce the chips for Apple that Intel is not able to make.
The chip shortage is now nearly everywhere. For months, it has sunk its teeth into the automotive industry, with its long and complicated supply chains where even mundane components contain chips, from door-lock systems to fly-by-wire accelerators. And if one part is in short supply because one type of chip is on backorder, the vehicle cannot be assembled.
Ford stepped forward with the most explicit warning last week: production in the second quarter would be down 50%, and for the whole year by 1.1 million vehicles, because it is lacking some components that couldn’t be built because of the semiconductor shortage. And it said that the shortage “will get worse before it gets better.” Numerous automakers have announced plant shut-downs so far this year.
Manufacturers of just about anything that uses electricity have gotten hit by it: Home appliances, heavy-equipment, computers – Apple warned that the chip shortage is hitting iPads and Macs – and, well, even sex toys, according to the Wall Street Journal, citing Crave’s CEO Michael Topolovac. The sex-toy maker began stockpiling semiconductors late last year as lead times started increasing, he told the WSJ. “We’re sort of bracing for at least a year and, theoretically, beyond two years.”
Early on during the Pandemic, automakers and other manufacturers, seeing swooning demand for their products, cancelled orders up the supply chain, including orders for semiconductors. And chip makers stopped making them. But then stimulus payments fired up demand for durable goods of all kinds overnight, including vehicles, thereby firing up demand for chips just after chip makers had stopped making them, and production fell behind demand, and factories cannot be built overnight, to meet this historic spike in demand.
In addition, a number of semiconductor plants shut down this year for various reasons, from snowmageddon in the US to a fire at a plant in Japan. And the type of stockpiling Crave’s Topolovac disclosed when the shortage was appearing late last year aggravated the shortage further.
This spike in demand for durable goods became a true WTF moment in March, when the latest round of stimmies was being spent. At some point, the distortive effects of the stimmies will fade, but not yet.
Gelsinger told CBS that Intel is reworking some of its plants to increase production of chips for the auto industry. It would take at least several months for the strain on supply to even begin easing, he said, and “a couple of years until we catch up to this surging demand across every aspect of the business.”
TSMC chairman Mark Liu told CBS in the interview, “We heard about this shortage in the December timeframe.” By January, TSMC “tried to squeeze” as many chips as possible to the auto industry’s supply chains. He thinks that TSMC can catch up with “the minimum requirements” by the auto industry before the end of June, in terms of chip production. But for automotive chips particularly, the supply chains are “long and complex” and it “takes about seven to eight months.”
This would confirm what the auto industry has been saying, that it’s going to get worse in the first half, but get better in the second half, and that the chip supply chain problems might not be resolved until 2022.
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These share buybacks are going to look like such a great idea in hindsight after the market melts down, aren’t they?
Those corporate tax cuts, govt subsidies, and reduced regulations – and and those “s’s” mean plural as in multiple huge corporate tax cuts/regulation cuts – are getting us reduced production less production. less govt revenue.
I am so shocked. Weren’t those supposed to increase production, employment, govt revenue?
Therefore if doing the same thing over and over again each time expecting a different result is insanity, let’s choose sanity instead.
Huge corporate corporate tax increases, strict govt regulation (ban buy backs for starters) and fines instead of subsidies.
Something that nobody seems to mention when discussing corporate tax cuts is that money for running and expanding a corporations business comes out of pre-tax money. While money for dividends and stock buy backs comes out of post tax money. Corporate taxes are basically a penalty for not re-investing in your business. Lowering corporate taxes doesn’t mean more money to invest in growing the business, it means more money for buy-backs and dividends.
Corporations paying taxes is a big joke! The same myth gets re-circulated by their trolls!
-55 of largest US Companies including Fedex,Nike, paid NO taxes
WP May, 5 ’21
-At least 60 companies reported that their 2018 federal tax rates amounted to effectively zero, or even less than zero, on income earned on U.S. operations, according to an analysis released today by the Washington, D.C.-based think tank, the Institute on Taxation and Economic Policy.
POINTS
Nearly 100 companies in the Fortune 500 had an effective federal tax rate of 0% or less in 2018, according to a new report.
CNBC Dec ’19
Also not mentioned is that corporations pay taxes with money they have typically obtained from customers. Corporate taxes are just a pass-through from you the consumer to the government. That’s why governments love corporate taxes. The bulk of the people don’t understand that it’s them that’s paying indirectly. As in “We have met the enemy and they is us.”
Lisa_Hooker,
“Corporate taxes are just a pass-through from you the consumer to the government.”
Hahahahaha, where is my rebate after corporations got that hugest tax cut ever in 2018?
Prices are set in the market place, and businesses charge the maximum possible that will still allow them to pursue their market-share goals. That’s how prices are set, not by taxing corporate income. That’s a red herring put forth by the corporate lobby to reduce corporate taxes.
Corporate taxes are a pass-through from corporate income to the government and reduce corporate profits, and possibly shareholder wealth. That’s how that should be phrased.
Lisa_Hooker,
It’s more complicated than that, corporate taxes properly applied takes a share of the profits that would otherwise, mainly go to the upper class.
Corporate tax increases are historically paid approximately – 1/3 from employee payrolls (includes top management), 1/3 from shareholder dividends (your pension or equivalent), 1/3 from customer price increases (CPI). Paid from corporate profit. But, then again, a corporation is a legal fiction for convenience and longevity. Not a partnership, not a proprietorship, not people.
I agree that customer prices are maximized in the marketplace. When did the government ever give more than lip service to the PEEDONS (consumer prices, employee payrolls, people’s retirements) when proposing increased taxes?
As for your rebate, Wolf, tax payments are unidirectional. A tax rebate would be a different law. But you knew that.
“Huge corporate corporate tax increases”
Riiiiiiight… because they will just -EAT- that added expense on their balance sheet rather than just -PASSING IT ALONG TO THEIR CUSTOMERS- through increased prices or a smaller quantity for the same price in that food container or lowered quality of their product or by moving their production to China…
I’ve got a better idea – a mandatory business course in public schools along with another mandatory course to teach the learned skill of critical thought and analysis.
Winston-any chance of your best-of-all-world’s prescription’s implementation/efficacy occurring any time soon while letting things continue the way they are?
(Is there really nothing to see here? Think of scene between Miriam and Reg at the daily (the exact long-established revolutionary group’s acronym escapes me, here) meeting : “…it’s HAPPENING, Reg!…) in Monty Python’s ‘The Life of Brian’.
may we all find a better day.
That’s the spirit. Just lay down and take it you Plebes. Don’t you dare inconvenience your corporate masters. Such a cucked mindset
Nah, you don’t get the big procedural picture Winston.
For the next dog and pony bailout show, instead of their jets, make ALL the corporate “C” suite guys AND their Board of Directors, go to DC in cars that use use only voice command…”TURN LEFT, QUICK!”
After all they are highly intelligent, fast thinking, proven correct, and excellent speakers and decision makers, or they wouldn’t be in those positions, right?
Us peons deserve our cheap “serves em right” show…..again.
(They can settle up with their congressional stooges later, if anyone gets hurt on the way.)
“Winston-any chance of your best-of-all-world’s prescription’s”
Best of all world’s? That’s a description of the way a business works everywhere in the world world. Like I said, there is a dire need for business courses in public schools.
And of course we live in a corporatocracy with an OWNED government and have for a VERY long time, but the balance sheet FACTS are still valid. Either the customers pay for increased production expenses due to taxes or the employees do through lower pay or lower numbers of them employed.
You want real change? Get rid of OWNED government that allows the good paying jobs the average Jane and Joe can handle to be shipped overseas. But good luck with that because BOTH major parties are fully owned and have been for a very long time.
You mean like throw all of the lobbyists off the Congressional Baseball Teams? Both sides want to “win”, because it’s truly the All American Way! ……and they might lose some of their best players.
Insufferable.
The Boeing way of business was the rule, not the exception.
Maybe COMAC will make an offer to buy Boeing. It’d be appropriate…
:)
COMAC depends on foreign companies to design most aspects of their planes (2 models, only 1 with actual deliveries so far) and depends on foreign companies to make the more complicated parts like the engines. COMAC mainly makes just the fuselage (the body) of the plane (with the aid of foreign parts). This is different from boeing or airbus, which can design and make entire planes.
I’d have no issue with share buybacks if insolvent companies were allowed to go bankrupt and their investors wiped out. But that isn’t the way we do it anymore.
Yes, it’s excruciatingly painful to see case after case of Lemon socialism in the U.S.
Socialized losses while profits disappear from the company balance sheet. It’s a cycle that encourages grift and cronyism.
Bribery is the way.
Those execs sold their stock years ago.
Remember Radio Shack. They were the buyback queen of the stock exchange. They bought all their shares back all the way to zero. Then filed for bankruptcy.
Cuts in R and D is commonplace in businesses these days. They are more focused on pocketing the cash with buy backs than making a good product. Intel has nobody but themselves to blame for their falling behind in the industry. Its embarrassing. At least they recognize their failures and at least are paying lip service to doing the right things. 12% of the industry? What a joke. $50B bailouts? What a joke. Focus on making a good product and providing good service and the rest will fall in place. Instead, these clowns, focused on lining the pockets with buyback in billions of dollars. What a joke.
Law-it would be interesting to know how much top management of these corps. have any real connection to their factory floor, i.e.: extensive knowledge of, and affection (daresay love?) for the products that make their firm its living.
Efficient money management is critical to any business, but appears these days to have experienced very serious mission creep in terms of its overall importance. (The tool has become more important than the job).
.
may we all find a better day.
Seems like the way it’s played today, a manger is a manager (plus knowing some “good” marketing guys) and what’s going on below doesn’t matter. Detroit had the Japanese and others beat the crapp out of us for that reason, TWICE, it now seems, from what I learned taking Auto Shop ’10-’13.
Were the joke and Intel, AMD, and NVDA (aka, Semiconductor Industry Association) is laughing all the way to the bank (in Zurich).
When the Fed is blowing a bubble the easiest money is riding the gravy train of the P in the PE equation. Might get a bailout when it all falls apart.
Share buybacks – proof that Trickle Down works.
“Gelsinger told CBS that Intel is reworking some of its plants to increase production of chips for the auto industry. It would take at least several months for the strain on supply to even begin easing, he said, and “a couple of years until we catch up to this surging demand across every aspect of the business.””
Sorry, Gelsinger, this “surging demand across every aspect of the business” is as fake as a $3 bill. It’s due to profligate money printing from the FED, and grotesque stimulus from government. It’s not sustainable and we will be seeing a dearth of demand, not a surge.
Seriously. Whenever I hear people talk about the “booming” economy, I have to question whether I’m the insane one.
That’s for top 10% but not the rest! Apparently you ain’t in that club!
Not a bug but featore designed by Fed since’09!
My first thought, too. Maybe the shortage isn’t on the supply side, but on the demand side.
However, the CEOs are right in that the demand side isn’t going to wane anytime soon, when it’s not even comprehended by the individuals responsible.
Warren Buffet says there’s nothing wrong with share repurchases. So this guy must be wrong ;)
Intel as a foundry will never work out. Manufacturing chips for customers on a large scale requires a different mindset. Intel the foundry will naturally place more importance on Intel the chipmaker. I don’t think they even understand the concept of a Chinese wall.
There is nothing wrong with share repurchases out of profits. The same profits used to pay dividends or executive salaries.
There is something very wrong with share repurchases using debt.
There is a lot wrong with blowing billions of dollars on share repurchases instead of investing this money in R&D and new manufacturing plants. See Intel.
Focus on stock price, and virtue signaling in Corps is rampant. To the point of losing focus on core businesses.
Because the new gen management squandered resources on stock price chasing at the cost of R&D, is THEIR problem.
Fire managers and find new ones focused on THE BUSINESS.
Make tons of profits on new products and your stock will go.
R&D, that’s for the low end of the value chain. This country must focus on more value added, higher paying service jobs. R&D needs to go the way of low paying manufacturing jobs.
Cause we can never have enough baristas and Starbucks. ?
Nearly 50% if not more rise in S&P since ’09 is due to buy-back program. Buy back was illegal until 1986! Reversed by you know who!?
IMHO there’s only one positive reason to buy back shares: when management believes the shares are undervalued. If the company can get $1 of value for 80 cents why not? Back when value investing meant something a buyback was a sign of confidence by management.
@Michael Gorback, if management thinks shares are undervalued, they should spend their own money to buy them, not the companies’ …..
@MB
Technically, there is a fiduciary responsibility there I would think for share but backs if it was truly undervalued.
The problem of course is that the definition of undervalue is quite subjective. The definition of value itself can be subjective.
If you were running a biotech (a profitable one), you could argue that share buybacks would be criminal because value creation would demand either more dollars into R&D or more acquisition of companies with the right set of technical capabilities.
MCH, I rely on human greed and not fiduciary when it comes to value.
Which one would give you greater confidence when it comes to undervalued stock?
1. Management buying stock.
2. Management using company’s money to buy stock.
Stock buybacks used to be illegal and there is no legitimate reason why they should be legal.
There is everything wrong with repurchasing shares when it is linked to the paychecks of the corporate officers.
When a CEO can retire in 5 years with an obscene golden parachute because he neglected to invest in future growth it is not just wrong, it is criminal…
There is a new kind of class war going on. Instead of simply the workers vs. the rich we have workers and rich owners who want to make stuff vs. rich who want to speculate and financialize everything.
The FIRE sector (Finance, Insurance, Real Estate) is at war with the rest of us and so far they are winning. But they are not going to like the end result. In fact, no one will.
Executive salaries are relatively peanuts, stock options are what makes executives rich, and that depend on stock price, i.e. buybacks.
Super high taxes would solve the problem. Option profits should be taxed at confiscatory rates. One reason to have taxes is to control bad behavior. With super high taxes lawyers and doctors would rather play golf on Wednesday than do unnecessary surgery and lawsuits. That was one benefit of the 1950s. It was not expensive to be honest. Now with the ability to make dynasty creating wealth manipulating and stealing is the order of the day.
It’s kinda ironic that they are now getting into this “foundry” business. About 15 years ago, Intel refused to make chips for Apple’s iPhone because it was low-tech and low margin. TSMC accepted to do it. Thanks to that, TSMC became the leader and a behemoth in the market.
That decision 15 years ago turned out to be a monumental display of lack of vision by Intel’s management. Of course, this incompetence led to no real consequence to them — they were still handsomely paid.
int-bullseye.
may we all find a better day.
Around 25-30 years ago the US gave the DRAM fab market to Taiwan because it was low-tech, not sexy like CPUs. Some of us said at the time that that was not a good idea. We were concerned that by concentrating on processes and feature size the Taiwanese would become the experts at those skills. Well they did. And they kept up with the latest developments in those areas and improved them. As expected, process expertise and feature reduction is transferable to the latest chip designs. Not good when you can’t build and verify in-house what you design.
Any company that receives public subsidies should not be allowed to pay out any dividends, buy back shares, or pay bonuses to the c-suit that year. The same should be true if a company lays off more than e.g. 5% of their work force. Any subsidies should also be compensated in shares. Maybe that would incentivise companies to not waste money and then call for public assistance. In truly exceptional cases (such as a global pandemic) were a business would fail without subsidies they should be available. But if the public needs to absorb some of the burdens, so should the owners and decision makers. After all, isn’t that always why the CEO and managers claim they deserve such gigantic salaries, because they carry so much responsibility? Well, then they should carry some responsibility for negative impacts too!
The system is rotten to the core and needs to fail. There is no fixing it. Not only is there no political will, the corporations are in full charge. Nobody votes against their own financial interests, and that’s why we find ourselves where we are right now.
Cool.
Let’s start with “green energy” and move on to EVs from there.
But…but…but…
Pay money to the c-suit?? Geez. Pay anything out until they pay that bailout back with interest Start acting like a business Intel and quit leaching on government bailouts. Don’t you know? They are broke too.
Intel funded the share buybacks by retiring out the older “expensive” engineers during the last 10 years and replacing them with new cheap engineers. This may be ok if your are making video games or EV’s but getting to chips 10nm and below is not about whizzy tech or cool coders. It is about the relentless pursuit of perfection in every single aspect of the manufacturing process. In such an endeavor true traits that matter are experience, learned wisdom, dogged perseverance and the ability to make hard decisions. None of these are traits that young employees have, especially when they are led by a business school guy from SUNY Buffalo instead of PHD engineers like TSMC.
Ask Boeing about using cheap engineers. Plane fall from sky, go boom.
Nothing like a control system unstable and out of control. In addition to hiring cheap software / controls engineers it seems like they were too cheap to invest in simulators to adequately test the new control system. But hey, money saved is money earned, right Boeing?
Boeing is “too big to fail.” We know what that encourages. See: Wall Street banks.
Text messages release 2 years ago from the 737 MAX test pilot contained observations that MCAS behaved erratically during testing prior to the aircraft entered service.
@Depth Charge
Correct. Hiring half-priced half-wits was a good plan until it wasn’t.
I got to look at the code used to control the 373 Max. No comments, no sanity checking of the inputs, no thought of checking the flight computer for confirmation, no keeping a record of how many stall attitude corrections had already been done. Nothing.
If you turned that code in as homework, it would get a D.
Then hire MBAs from Harvard. And failing that bring in consultants from McKinsey!!!
The later told LG (the Korean company) to cut R&D expenditures to the bone, with disastrous results.
Let’s face it. The goal of a business school education (Harvard, SUNY Buffalo, etc, etc) is to make business school graduates rich. The rest are collateral damage.
Business consultants only care about increasing profitability, so you can keep them on the payroll. They don’t care about anything else.
Ah, the term is “expanding the envelope”! I was a management consultant for decades and that as always the most critical client objective.
“Then hire MBAs from Harvard. And failing that bring in consultants from McKinsey!!!”
Failing that, get the marketing and sales big guns. They should be able to sell any broken crap you make.
The business guys are dependent on the engineers, but too stupid to realize it. They’ll completely junk the long-term prospects of a company for short-term gains. With enough of them doing it across the whole economy it’s like a bunch of termites eating out all the floor boards. Congress and Jerome now playing paper mache with dollar bills to keep someone’s foot from blasting through into the crawl space. Are we living in a paper house yet or is there still some structural integrity?
The young engineers don’t get taught that every instruction and logic gate has a “cost” associated with it, time. They pat themselves on the back if their programs are longer or the number of logic gates is higher and more complex. It really is amazing, that all the excess computing power goes to speed up the inefficiencies in the code and logic.
My favorite idiocy is when employers ask for programmers who have coded programs with tens of thousands of lines. They see this as a good thing, spinning the wheels.
“if their programs are longer or the number of logic gates is higher and more complex.”
Yep…software bloat in software is a massive annoyance/idiocy as well.
Although I will say this…while at first I thought it was pure laziness on the part of NewGen coders (ie, strap on some huge library of functions to avoid coding from scratch…then neglect to prune away oceans of unneeded code) I have come to be a bit more understanding.
1) The incredible proliferation of hardware/OS/browser combinations has made interface/housekeeping/driver programming an absolute nightmare.
The solution – use a (huge) library that has all that interoperability code built in – but at the cost of huge amounts of unneeded code for any given install.
But then at least the company doesn’t have to generate dozens/hundreds of install packages for every conceivable end user configuration.
But the cost is huge code bloat on *every* install.
2) Time is money for the software shops and most will accept ugly, bloated code in exchange for fast turnaround.
3) There is a sort of product upselling incest that goes on between hardware/software companies.
Ugly, bloated code requires faster processors…new sales for hardware side.
Once money for new hardware is laid out, need new software to really take advantage of it…new software sales…basis for even more bloated code…
Requiring new hardware.
Rinse repeat.
Do you want to be flying in the that plane or riding in that car will be the question going forward. Stripping the bloat gives you amazing speed and control.
Petunia,
I don’t disagree, I am just pointing out the semi-rational rationale for what has become enormous levels of bloat.
(A simple index is the relentless upward march of minimum required RAM…which expands to accommodate the bloat…another “problem” that could be avoided with slower, more careful coding).
And I agree that having tons and tons of uninvoked code loitering around in any given install is probably not a great idea (security risks, some wildtype error from left field, etc.).
But who knows…DNA has introns (long sequences that don’t code for proteins) whose role is a bit of a mystery (at least circa 25 yrs ago…) so maybe there is an analogy to all that uninvoked code in software bloat.
But I am actually a big proponent of minimalism in computing and web design…it tends to make products more of a commodity and therefore cheaper.
As mentioned above, the bloat is a big player in relentlessly expensive upgrade cycles.
Personally, I was very happy with my 386 (DX, thank you very much) running Excel 3.1 through about 2009.
If fans hadn’t started habitually dying, I would likely still be using that combo today.
I’m still kinda miffed that used computers tend to bottom out at about $80 today…I *know* there are millions of older (but functional!!) machines out there.
But some village children in Zimbabwe are hogging them all (for the humor impaired…that’s a joke)
Have spent last 35 years working with developers. Finally got to a point where I came to realize that when creating software,”Simplicity is HARD, complexity is EASY”.
One of the biggest issues I see these days is developers trying to cram every data field into the database, and then load every bell & whistle (‘features’) onto the application. All that does is obscure the end users decision making process.
That’s why these days, a ‘Dashboard’ front end format for a new System is almost a requirement.
S.B.G.1-once again illustrating the maxim: “…if something works REALLY well, it doesn’t have enough ‘features’, yet…”.
i’m not an i.t. person (obviously), but remember some of my friends who were/are remarking back in the day that increasingly sloppy code writing was accelerating with the expansion of CPU RAM (was it that the old 16mb headroom that originally forced tight code to be written?).
may we all find a better day.
Yo, Cavalry – for years PC codes ran in less than 640 kilobytes. I made industrial control customers happy with codes that fit in 1-2k kilobyte EPROM for years. Then again, my stuff didn’t have to include embedded video/audio from unknown third or fourth parties.
LH-thanks for the informed history. (…or, as i’ve heard tell about our ‘American Way’: “…if a little bit is good, a whole lot more is better…”).
may we all find a better day.
But, but, but … my manager evaluates my productivity by the number of lines of code I write (or manage to sneak in as a cut/paste).
Other than that it is 7 nm and below where the real R&D is these days SC, I agree totally with the concepts you present above.
Having been through the ”older removal younger replacement” situation with clients, customers, and critical suppliers several times in the last few decades, I can and will testify it is one of the most challenging obstacles to any kind of reliable productivity/scheduling.
May the Great Sprits help us all if the trend of getting rid of the ones with experience and hands on ”know how” of the last couple decades continues.
Speaking as a “replacee” (a bit over 10 years ago), it’s even more challenging when the replacements are H1Bs having English as a third language.
@Lisa
Yeah, H1-B is getting to be a National Security Problem.
I used to live in Palo Alto. After Bill Clinton signed the H1-B expansion (September, 2000), people in Silicon Valley started telling their children to not major in Computer Science.
As more people realize that H1-B means that “No US citizens need apply”, the number of students majoring in STEM will fall even faster.
What really hurts here is that Morris Chang (the founder of TSMC) is a US citizen (born in China). His Taiwanese citizenship came later. He had a great career (25 years) working at Texas Instruments and GI. His idea of a foundry business however was laughed off by the giants of American corporations (including Intel), so he decamped to Taiwan.
Think about it, instead of TSMC, it could have been USSMC.
We let this one get away folks.
Who are you talking about that came from SUNY Buffalo?
Intel has been behind in chip technology for over a decade at least. They always produced a good enough for average use chip in their computers, but they lost that market as graphics became more important on PCs.
If you wanted better graphics, you didn’t buy Intel, you bought AMD. And if you wanted to supercharge the graphics, you added a NVIDIA graphics card. That’s still the case. I think most users think of Intel as reliable, but not good enough. They need a really strong product line to make a comeback.
I recall last year that Apple is making their own chips for laptops, etc in house now and has shuttled Intel. Good for them.
Correction. Apple designs their own chips, but they outsource manufacturing to TSMC. Same with Facebook, Amazon, etc.
Thanks for the clarification.
and Qualcom….and many others. No wonder China wants Tawain.
It is truly insane that the USA has so negligently allowed itself to become almost completely dependent on other nations for its economic survival. Not only did we move most of the really important manufacturing needs to the totalitarian China but we didn’t even have the good sense to retain at least some emergency production capabilities here. What happens when we have a serious conflict with China? What happens when China completely takes over Taiwan? They have us over the barrel and the primary ways to reverse that trend is to mandate production of certain essential items here in the USA and stop unproductive corporate tactics such as stock buybacks which only serve to enrich the wealthy but fail to make companies more innovative and internationally competitive. The financialization of everything will destroy us.
Hey now! It sounds like you are not putting the needs of the shareholder first! Are you a socialist or something :P
Since Thatcher & Reagan kicked off globalization to break the backs of Union’s this was the predictable consequence.
But at least the wealth of the .1% is now back up to the relative levels seen in the roaring 20’s right :D I am sure we are all going to get a trickle down, golden shower from our .1% nobility any day now :D
Our fearless leaders thought China with an army of 200M would never stand a chance against our army of 2M men. Really.
Your numbers are grossly off, but you do have a point. China currently has around 2,300,000 active personnel, which is about 1 million more than we currently have. But if you look at “available” in the event of a war, we have about 75 million. China has over 300 million. And China has shown that they care little about people, so they could flood our mainland with sacrificial soldiers and likely overtake the USA with those numbers. That is why it is so important that every man, woman and child in the US have weapons and know how to use them – because a soldier won’t be there to defend your homestead.
The USA cares about people? That’s new. Our Afghanistan veterans would disagree I think. Heck, how about our troops in Iraq. They were sent there on false pretenses, remember? And of course, we haven’t been doing a good job on the VA front either.
Remember, the United States is a business. I’d suggest reading a book by one of America’s most decorated soldier, General Smedley Butler called War is a Racket.
Jesus. Did you just see some 70’s movie? The PLA which China is trying to downsize because it is basically useless and is involved in all kinds of unprofitable businesses, is not on land contiguous to the US. It would have to be brought to the US by a navy dwarfing the D Day flotilla which was several thousand ships that only had to cross about 50 miles of water. At that point there was no interference from the German Navy and almost none from the Luftwaffe. Would the US just watch as this invasion fleet covers thousands of miles?
You will have to find a more plausible excuse to arm the kiddies.
*China* wants to take over America? Why? What would they do with it — the place is wreck!
I know I’m supposed to hate China, Russia, Iran, N Korea, etc. but I can never remember why…
Petunia and Depth Charge,
You’re assuming that 1 on 1 Chinese soldiers and civilians would be on par with Americans, that’s extremely untrue. The PLA has among the worst soldiers in the world. They spend more time training to be obedient to the CCP than training for actual combat and most of the PLA is dedicated to maintaining the CCP’s grip on China. Most Chinese people in China are grossly out of shape, just like Americans.
Also there is no imaginable possible way that China could ever mount a land invasion against the US. All their ships would be sunk immediately and with no effort. It’s important to know that most of the super large cargo ships leaving and entering China are from South Korea. The CCP also can’t make good jet engines and their attempts at passenger planes are using foreign jet engines and foreign parts for all the complicated stuff.
If they even attempt it, they will probably fall to take Taiwan 1 on 1. While it’s possible to incredibly overwhelm Taiwan with Chinese civilians, Japan or the US assisting Taiwan could easily push China back.
Talk about semiconductors, and instantly people are warmongering because warmongering is so much fun in the comments.
I have seen it all here in the comments: Stock market dips, and it’s going to trigger a nuclear exchange between the US and Russia. The next recession hits, and it’s going to cause the US to invade Iran. For years, people have dragged out any and every crazy warmongering nonsense just to have fun and argue about it.
And then I end up having to delete dozens of comments… I’ve already deleted a bunch of them here today, but I cannot keep up, it seems.
Warmongering violates commenting rule #9
https://wolfstreet.com/2017/10/07/finally-my-guidelines-for-commenting/
Wolf,
It was sarcasm not warmongering. We can’t even protect our borders for heaven’s sake.
Oh… I was wondering where my comment went!
You said it Wolf!
With respect to a war with major powers, I think Tom Lehrer put it best I in “We All Go Together When We Go”:
When you attend a funeral
It is sad to think that sooner or
Later those you love will do the same for you
And you may have thought it tragic
(Not to mention other adjec-
-tives) to think of all the weeping they will do
But don’t you worry
No more ashes, no more sackcloth
And an arm band made of black cloth
Will some day nevermore adorn a sleeve
For if the bomb that drops on you
Gets your friends and neighbors too
There’ll be nobody left behind to grieve
And we will all go together when we go
What a comforting fact that is to know
Universal bereavement –
An inspiring achievement!
Yes, we all will go together when we go
We will all go together when we go
All suffused with an incandescent glow
No one will have the endurance
To collect on his insurance
Lloyd’s of London will be loaded when they go
Oh we will all fry together when we fry
We’ll be French-fried potatoes by-and-by
There will be no more misery
When the world is our rotisserie
Yes, we all will fry together when we fry
Down by the old maelstrom
There’ll be a storm before the calm
And we will all bake together when we bake
There’ll be nobody present at the wake
With complete participation
In that grand incineration
Nearly three billion hunks of well-done steak
Oh we will all char together when we char
And let there be no moaning of the bar
Just sing out a Te Deum
When you see that ICBM
And the party will be come-as-you-are
Oh, we will all burn together when we burn
There’ll be no need to stand and wait your turn
When it’s time for the fallout
And Saint Peter calls us all out
We’ll just drop our agendas and adjourn
You will all go directly to your respective Valhallas
Go directly, do not pass ‘GO’, do not collect two hundred dollars
And we will all go together when we go
Every Hottentot and every Eskimo
When the air becomes uraneous
We will all go simultaneous
Yes, we all will go together
When we all go together
Yes we all will go together when we go
ram-thanks for remembering ol’ Tom, and a time when society’s self-reflection was a bit more en vogue…
may we all find a better day.
“…when Alabama gets the bomb.” Thanks again Tom L!
Re: Warmongering violates commenting rule #9
GOOD!
And DC is so corruptly inert, that even when it *knows* there is a problem, it takes forever for it to respond (because healthy response disrupts existing corrupt relationships).
One example – The snickering CCP leader ads of 2009. Those got a *ton* of airplay before the 2010 elections and hit the “China Danger” issue exactly square on the head.
(Note that 2009 was already 5 or 6 years after Chinese competition (hugely supported by their currency manipulation…started in the mid 90’s) really started to hollow out American production tremendously).
So the US is 17 years late to the China threat and 11 years late…even *after* DC fully realized it (Snickering CCP ads).
As with the military failures of the last 20 years, our enemies/competitors understood the corrupted nature of our institutions much better than a majority of Americans did.
The capitalists manufactured the rope and hung themselves (well technically US) for obscene wealth.
Actually, the only thing DC really makes is green paper with which to “pay” for foreign sourced *real* goods.
Without that perversion of the international trade feedback mechanism, DC would have been forced into economic reform about 15 years ago.
But money printing kept the lies (and crooked relationships) alive.
It is truly insane that the USA has so negligently allowed itself to become almost completely dependent on other nations for its economic survival.
Not so insane when you realize that the current elite class has no real affinity for this the country or it’s people. Thomas Jefferson said it best ‘a business man hath no country’.
endeavor,
My best memories from working tickets on the street at the 1996 Atlanta Olympics would make Jefferson proud.
At the beginning of the two weeks, nothing was that big, but I learned at a young age that everybody’s money was green, and treat people well so that they come back to you later for more business. I also established brand recognition, and said,”I’m ‘Dan the TicketMan’, I’ll be here most of the time. Thank you.” to everybody I dealt with. There was one main area that most of the deals went down in.
Many of my competitors scoffed at me for going out of my way to work with lesbians, and there were quite a lot of women who were into attending the women’s events, so I didn’t understand the bigotry. It was partly from homophobia and partly from the lesbians’ reputation for being cheap, but as the games went along, the same guys who were giving me shit for dealing with the women were now watching in envy as I was their go-to guy for tickets, and groups of them were asking for me by name.
When the USA played China for the gold medal final in softball, the ladies were peeling off hundred dollar bills and giving me hugs of gratitude. As much as I liked earning bank, I liked giving the idiots who’d treated these same customers poorly, and some were quite rude, a week prior a nice F-you smirk as they watched me getting paid.
Everybody’s money is green.
Dan-thanks for relating that experience.
In certain ways it seems to illustrate ANY imperial power’s hubris-
‘…if we have a lot of wealth, we must be exceptional. Having demonstrated we are exceptional, anyone in the world must, and will always, bow to us. (…by the way, does anyone remember how we got to this dance in the first place???)…’.
may we all find a better day.
@Earthman – why would China want to take over an insolvent country? Better to build new elsewhere.
Used car prices are going to go ballistic if they actually cut new production 50%.
New car prices will go up too! Back to basics for a while (keep my fine running 17 year old Mustang).
Concur. And my 21 yo Lincoln. A gem by the way.
They’ve already gone ballistic. Trees don’t grow to the sky. There is tremendous demand destruction happening right now, especially as the stimulus dries up.
It’s already happening. My local dealers’ lots are nearly empty, there’s much demand and their inventory is almost gone.
Same thing that happened with bike shops at the start of the pandemic, and they still haven’t caught up.
KGC,
They’re already going ballistic :-]
At some point though, people stop buying cars at crazy prices and wait instead.
I am one who is waiting, Wolf. I was planning on buying when COVID hit, which threw a monkey wrench into my plans. I tried to secure a deal Christmas of 2019 but it fell through. Then the virus came and I wasn’t in a hurry to do anything non-essential, then prices exploded. I am no longer interested at these price levels, but I am going to pay cash so price is the most important factor for me.
Why money is free keep yours buy Verizon stock equals free financing
I think the appropriate play in this environment is to go with a zero down loan, secure the car, then immediately call the financing company and tell them I have to go into loan forbearance – SO SORRY. Then I have a free car for a long time.
As long as they keep throwing money at everyone that won’t happen.
You ever wonder what would happen if, instead of giving everyone a stimulus check, they gave everyone a tax break for the equivalent sum? That would actually help the middle and lower class, and would have been a lot better on the economy too.
A tax break wouldn’t be giving money to the poor like they are now, because the poor don’t pay taxes. So, you wouldn’t get nearly the WTF charts we’ve been seeing, and Wolf and his readers wouldn’t get as big a dopamine rush.
The taxpayers were only the middlemen for the government stimulus. The true recipients were the corporations who ended up with it.
We are not quite there yet. BMW dealership around my hood still act like their S$$$ don’t stink. Got an email from them advertising come in to test drive the new M4, signed up, made an appointment, showed up and was told we don’t demo the new M cars, cause I wasn’t rich enough looking for them to test drive it. Meanwhile I see others testing the same car they said they are not demoing. This is on top of the $10K the add to the sticker on the $80K sticker price.
I guess for these BMW dealership and other high end makers that are still having inventories fly off the lot, it’s more selective than ever.
We have a big BMW dealership in our town. I have a friend who works in the parts department. He says that 75% of the BMW’s leaving the place are leased. And there are a ton of them on the roads around here.
Anthony A,
A low miles one owner lease-back from Penske’s Atlanta dealership was what I bought a year ago at his Bloomington, MN dealership. No winter salt & 60 cents on the dollar from new.
There’s probably decent deals like that at the Houston shop too.
I’m sticking with my 2000 Toyota Corolla with its hand cranked windows and no tech bulls$it. Its got only 85K miles and is now designated as a historical vehicle.
I think Intel’s misstep is illustrative of the US as a whole, we have put so much emphasis on spending on defense and enabling our large companies to offshore production without regards to the long-term implicationS that we have painted ourselves into a third-world corner.
US defense spending has maintained a relative constant 3% of GDP for about the past 40 years.
US defense spending has dropped from 50% of the Federal Budget under the Ike administration to about 17% today.
That doesn’t sound so bad… Until you learn that the Pentagon can’t account for Billions and Billions of the money it wastes every year.
That 3% figure is just wrong unless a series of dubious assumptions is made (“real” vs. nominal GDP, exclusion of Overseas Contingency Operations slush fund to circumvent budget caps, expansion of “Dark Budget” funding).
The US military could do an equivalently inadequate job for 65% to 80% of the money currently being spent.
Writ large, the national defense apparatus did not cover itself in glory over the last 20 years.
Lots of costly f*ckups, strategic stupidity, intentional waste, and on and on.
You can’t spend 20 yrs mostly battling essentially non-industrialized powers to a draw (or re-fought victories) and think the US has a particularly competent military leadership.
Especially given its 1000 to 1 advantage in material resources.
Welcome to the $h!thole Decade!
…. followed by Sh!tholes’ 2.0, 3.0, etc .. as far as the Lies can be!
I haven’t read the article yet, but I have to comment first. This is going to be an interesting read, but here’s my observation as a laptop connoisseur: Intel got their ARSE handed to them by AMD. I just had a laptop delivered with AMD Ryzen 7—these processors changed the game completely. Intel was caught with their PANTS DOWN. Anyone who knows anything in this field wants AMD. Intel is laughed at. I waited 6 months to get my hands on a decently priced AMD Ryzen laptop, now I have to support Intel for being L0SERS??! F THAT! F THIS WHOLE SYSTEM!
I have had both AMD and Intel and I have never been able to tell the difference. My current, really old HP Envy is running an Intel Core i7-4712MQ CPU. This is, hands down, the best computer I’ve ever had. I think I bought this in 2011. I never thought it would last this long. I’ve had to take it apart and fix the hinges and replace the fan, but other than that it’s been rock solid. And it has fallen to the ground at least half a dozen times.
To a computer nerd especially into building their desktop there’s a huge difference in current generation between AMD and Intel. Basically Intel current generation desktop high end processor are overpriced and offer subpar performance. Intel fall asleep a while back thinking they can underestimate the underdog and got comfortable going with 14nm++++++ design because of production issue and lack of competition before. Did AMD do a number on them on that one..
DC,
If you are an “average” user, you will see no discernible difference between the two chips. It’s when you need to run graphics with high frame rates that you will notice. If you have to run a large badly written inefficient program, it will run better on the better chip. Also the better chip will allow you to change more “environmental” conditions on the computer, like timing, speed, temperature, etc.
I will be the first to admit that I am no techie. I really have no interest at this point in my life. A computer is a tool that I don’t want to have to work on, so one that gives me good service and performs well for what I use it for is all that I care about. While I’m not doing high speed film editing or anything, I do have a bad habit of having 20+ browser tabs open at the same time, many running live refreshes, and the computer seems to handle it with ease.
I thought I would have been in the market for a new laptop WAY before now. Same with my Galaxy 5 smart phone – it’s now over 7 years old but still does everything I need it to. I’d be interested in knowing if the processor I have was ever highly regarded, or I’m just one of those “average users” who is too dumb to realize I have been using junk all these years. Ignorance is bliss, as they say…
DC,
Intel focused their business on doing a good job providing computing power for retail consumers because retail has better margins and lower expectations. For the retail consumer they always provided a decent computing experience.
AMD went after any business they could get and became the go to provider of specialty chips. They left no money on the table. This differentiation is why AMD now has the better products.
That processor was released mid-2014. Laptops today are made so much cheaper (especially HP trash). The support numbers you call are horrible—you’ll spend hours on the phone, all the while unable to understand the reps. I had a Ryzen HP laptop 6 months ago but had to return it because the HP build quality was absolute garbage.
I see my original reply to you is still waiting moderation, but since you asked another question, I’ll add: your processor was high-end in its day. The AMD Ryzen 7 I bought is mid-high level. The AMD is around twice as fast as your Intel. Strong performers are good for dealing with Micro$haft Wind’ohs 10. I love my low-end Windows 7 Intel Celeron machine; I too frequently have 20+ tabs open without fuss. One thing that’s nice about the higher-end Ryzen is when I click “uninstall” on some Wind’ohs 10 junk, it’s done basically instantly. I have another new Celeron machine also; it’s probably not as strong as my ancient one…Intel doesn’t seem to be updating their entry-level stuff which I have a hankering for.
Brinda what did you purchase? I too have been dissapointed with HP laptops these past few years.
Harrold, I bought a Dell. It’s my first one. Build quality seems pretty good, but I haven’t tested it much at all. They said the screen was 300 nits, but it’s more like 250—-so I cannot recommend based on that lie (it’s an inferior screen big-time). They are announcing the updated line this week sometime, maybe today actually…. I really like Acers but it’s impossible to find any, even on their website. I got rid of a newer one and miss it.
That one was launched in Q2 2014. In those days Intel was way ahead of AMD. Now it’s the other way around.
I looked up my CPU and it is a 2014 model which didn’t line up with my memory. Then I remembered what happened: I bought my original laptop in 2012 but it had a hinge problem. After 2 attempts to fix it failed, HP offered me a new computer as replacement. This is the one they gave me. The previous model was one I actually liked better, but the case was bad, but this has served me well the past 7 years.
Forget even AMD (even though, their latest is surely a marvel). Apple’s M processor family delivers much better performance and consumes much less power.
It’s truly a game-changer for the consumer market.
https://www.extremetech.com/computing/322120-apples-m1-positioning-mocks-every-x86-cpu-amd-and-intel-have-ever-launched
intosh,
TSMC makes the Apple M processor. Apple is not a chipmaker.
I know. Apple designed the chip. TSMC produces them.
Same with AMD — AMD is not a chipmaker either.
Wolf,
To say that Apple “designed the processor” is slightly misleading. What happens these days is that Apple bought the 64-bit CPU library from ARM, selected the options it wanted (quad-core, lots of cache, etc.), and then did some tweaks to the external bus, Southbridge interface, etc.
Closer to the truth is that Apple specified the processor using the ARM tools and ARM library.
[Yeah, I can be a little pedantic.]
Agreed, except Mac laptops are too expensive for me because I don’t like small screens, otherwise it’d be a good value. I’d love to get away from WinDUHs (I have a new SSD and put Linux on a USB drive, but I’m too lazy to actually fully install it). Some day when I’m rich I’ll buy a Mac…or have kids and get big stimulus $$$$
– The story only confirms that A LOT OF (american) CEOs pay more attention to their own wealth and pay less attention to the wellbeing of the company they lead. Intel is only the latest example.
– Will companies like Intel be able to catch up with their competitors, even with these subsidies ? I doubt it ………….
The USA is under the control of a parasitic class of bankers, businessmen and politicians who are systematically destroying it. They are stripmining everything of value.
Intel is behind on process but their tech is generally fine. 10nm is comparable to TSMC 7nm but by their full launch, TSMC will already be offering 3nm or 5nm. I forget the exact trajectory after current 7nm.
There isn’t really a way to jump node size in one fell swoop so Intel has to hope that their next ten years is blunder free and ambitious and also that TSMC has issues dealing with anything less than 2nm just to catch a break to reach parity. The process disadvantage is how AMD lost their initial foundry dreams, and how complacent Intel with some bad process attempts and unambitious business practices lost their foundry lead.
This latest plan to put new chip factories in Arizona and Israel shows that Intel is still up to its old tricks and cares more about subsidies than doing what it takes to make the best chips in the world. Making chips requires huge amounts of water and cheap electricity. Israel and Arizona have neither (certainly not in the medium to long run). As long as the corporate mindset at Intel is about chasing subsidies it will lag behind.
Arizona is the second leading producer of cantaloupes, honeydews, pistachios and dates for the nation.
I’m sure they can spare some water for another chip plant.
Sounds like a bad trade. You can eat those products grown using the (limited) water. Can’t eat chips.
Watch and see…the next ‘American’ chip plant will be built in Mexico.
Harrold-check AZ’s portion of the CO River compact, the projected amounts of available water at the time of that compact, and the actual amounts available now and going forward (vs. the greatly increased usage by ag and metro populations than projected). Doubt that the current holders of straws in the CO or Gila River Project will yield them gracefully…
may we all find a better day.
Man, this “normal” really do suck big time. As somewhat of a gamer, trying to get my hands on a RTX 3080 or 3090 is like bidding for a house. Thanks to FOMO, scalpers and Crytominer, either you get lucky hitting the refresh button or wait for days outside of Microcenter or willing to pay insane markup on Ebay. Things are so nutty, even my 2 yr old RTX 2080 ti is going for 30% more than I paid for brand new used.
All this shortage though, one has to wonder if we’re in the biggest scenario of the bullwhip effect once supply does catch up and eventually completely outpace demand, your classical bullwhip in supply chain speak
I appologise for the lengthy text. I am a previous Intel employee, worked with Intel as an Engineer with some insight into the problematic. I stand behind every word in the following text, as I have seen it with my own two eyes.
The change in market
1) In terms of technology of manufcaturing, intel was king.
2) With a technlogy advantage in manufacturing they could increase profit (more chips per wafer) while enhancing chip performance. If you remeber the 90s then you remeber how fast a computer became obsolete. This aspect of the early days created a neverending craze for new chips.
3) As they reduced size the performance aspect suffered (a matter of understanding basic physics), creating a stagnant market where, since no significant performance increase was present, people simply used their old PC until failure or a good deal opportunity.
4) They tried to branch out into the mobile market but failed to seize the moment (Qualcomm is king). They also tried to some kind of wearables but the market was too small.
5) Since manufacturing technology was not relevant to performance, chip design became the main success parameter. Intel had a no-patent policy in my division (thousands of inovations forgot and lost) or was very inactive in this field.
6) With a good design AMD came out and simply ordered a bunch of chips from TSMC(?). With a good and inovative design and low manufacturing cost they took the market by storm.
7) Intel, without good leadership, tried to out-technology the market, but since technology does not mean significant performance improvement they could not convince the public to purchase their chips.
Internal problems
1) Intel became lazy. Everyone was looking for the easy way out. No signficant technology development was done. The once “CAN DO” attitude succame to the managerial “LET THEM DO IT”.
2) Managing information was power. A hardline lunatic took over the division and soon engineers were excluded from all relevant meetings. Information was centralized and decisions were made based on opinions not data.
3) To reduce cost Intel was looking into getting rid of some of their employees. The hardline lunatic and his gang took the opportunity to get rid of any significant resistance within the department, targeting senior engineers and people of authority. In two waves Intel went from a company to a kindergarden. (When 2 year of work experince makes you a senior, you get the point).
4) With the seniors gone, we had no direction. Mistakes were made, same ones from the previous technologies. We had noone to ask. Problems were not solved but pached. They needed more and more people to keep the process afloat.
5) The 14nm started slowing down in progress. Every “inovation” the managers could think of resulted in no significant yield/profit increase. The meetings became more secretive and data was hidden and the published one was manipulated.
6) To accelerate the 14nm ,the next technology in line, was scavanged for resources, causing all development ot halt while on paper everything was fine. (Example: A lead position for a key critical technology was left to an recent college graduate with 2 months of work experience).
7) The failurs became obvioius, someone had to pay. They ripped the good engineers from their teams and started throwing them at the problems. The last residues of the structure were obliterated. The average engineer stayed less then 18 months in intel, with senior being anyone who stayed more then 1 year.
8) All the while the HR was focused on not getting involved into the whole thing, except when they needed to cover the Bosses or skew the data to fit some kind of model. No sincere effort on their part was ever undertaken to assess or fix any aspect of the situation.
Today ,those same people are in power, in even higher positions of authority. They in a few years desintegrated a powerhouse of technology, a factory is unmached by it’s complexity and capabilities. Intel cannot scale it’s process for one simple reason:”There is no process in Intel!”
Thank you for providing your perspective as an former Intel employee. Intel definitely got lazy and there’s certain level of hubris along with being the big dog for so long. Personally I am glad they are suffering the consequences now and couldn’t be more happy to get my Ryzen 5900x right after launch.
Phoenix, it’s not a matter of being lazy. It’s a matter of brutally dealing with anyone who opposes you. This had nothing to do with development, and everything with staying in power at any(!) cost.
I saw technitians break down and cry, people faint from being overworked, we had a series of sabotages in the factory (someone would turn valves and machines off in midst of operation), arguments that became almost physical, mental breakdowns…
My personal example: During an experiment we found an error in the process. It was a critical error that impacted the ability of the process to addapt to different products. In fact we found that there was no ability to addapt, the process was badly desinged. I was advised by a good friend (I owe him a debt of gratitude) to immediately look for another job within another division or elsewhere…The error was made by “the teachers favorite” manager and they started coming after us!!! We all left ASAP and the problem was pushed under the rug…
What you describe is a template for American industry. Change a few things to suit the business model, buy back stock, increase debt, fire employees.
Reading your account on the internal struggles at Intel, I have to say I’m not surprised at all. I work in the tech industry as well and have been working long enough to see similar problems with my own eyes. I work with customers too, so I can also witness this at their end.
When MBAs, accountants and salesmen run a technology company, you inevitably end up with an underqualified cheap workforce, with constant @ss covering by management, alienating and abusing the qualified workers who are still around. They want increased margins and profits and the easiest way is with a cheaper unqualified workforce. But things still need to get done; the only way is to squeeze every bit of juice out of the already shrinking pool of competent experienced employees. And when things go bad, they look at the payroll to pick the guys who cost the most for assigning blame — the cheaper workforce is untouchable because that’s where the magic of increased margin resides.
Sadly this is not just limited to tech companies or Intel. In fact I would say this is a feature and not a bug when it comes to the Corp capitalism we have. Having been in tech, CPG, med device and pharma industry, I see this type of management practice run pretty rampant across many big companies out there. Anyone think there’s any form of democracy in their big corp America culture especially with such a pathetic union represented workforce are truly ignorant or they are ones perpetuating this mythical narrative to the worker bees.
You can add many companies to the same dialogue as LDLS’ on Intel.
Saw the same thing in the car business…. it didn’t work out well. We’ll see if the company in question survives as an independent company or gets gobbled up because they failed to listen to those who cared (and, ultimately left). Now they have the suits and the tantrum throwers running the asylum.
Phoneix_Ikki,
All big corporations use the military as the blueprint for their top-down control structure. Have you ever heard of grunts having any say on choosing their manager or the managers any say on choosing their boss? Neither have I.
At least, the military doesn’t put any effort on selling and pretending that the top brass cares about the foot soldiers’ opinion (“open-door policy” BS) or that HR is there to work for the grunts.
There are companies out there that have adopted a democratic approach to decision-making and governance. These companies don’t have managers and most of them are pretty small.
Thanks for the Intel history recap.
Believe it or not, the same destructive management processes happen in other U.S. industries.
Your comment about Intel not going into a market because it was too small struck a bell. I remember back over 30 years ago when AMD was being ridiculed for putting their chips into toys or toasters(I can’t really remember what). They shifted focus fast to keep the company afloat, didn’t retreat from doing any business, and here they are again on top of the game.
Hah – My people designed a VOIP system when I worked at Ericsson, back in the 1990’s. The “telephone engineers” in Stockholm didn’t like it because “there was no QoS (quality of service) on the internet” and basically killed it. CISCO grabbed it and ran with it.
The “telephone engineers” spent the next 15 years trying to make IPv4 into an ATM network, because “QoS”. While the rest of the universe just went with “More Bandwidth, Baby” with rate limiting on the edges, Ericsson was pushing RSVP, and MPLS “for the QoS”.
Realising they were losing, Ericsson were buying IPvX businesses all over the place, only to be smothering them with “Ericsson Culture”.
Only Qualcomm and Juniper Networks managed to escape (Juniper crippled for life though :).
Ericsson Stockholm never once figured that they were the problem!
Thanks for that comment. I remember Intel being a chip manufacturing superpower back in the 90’s. AMD had better designs but they couldn’t manufacture them reliably while Intel could clone their FABs at will because they had great process control. A few bad decisions later and here we are. They are not alone – see HP, Motorola, IBM, Boeing, and many more.
Israel designed the best of Intel, in the good old days, but now they failed.
It takes a lot of time and research to figure out the prospects of individual corporations and their stocks. I could never gain any meaningful competitive advantage playing that game, and the key to investing is to learn what you’re good at. With that in mind, I’ll continue discussing a trade for those who are overly invested in cash-like investments, and have little or no leverage in their personal portfolios.
The Angry Trade (Part 3)
In part 1, I introduced The Angry Trade for investors who have been cautious with their portfolios and watched in dismay as irresponsible gamblers get bailed out time and again. In part 2 (see comments section of “Free-Money Stimmies Blow Out Consumer Income”, I described how The Angry Trade involves getting paid for using leverage. In fact, it is perfect for those who currently hold CDs and want to put that money to use without necessarily making an early withdrawal. You can continue earning money on the CD while using the asset as a backstop for long-dated treasury futures contracts such as /ZB. With a long position in /ZB, you’ll earn over 3.5% in yield on over $150,000, and the good part is that you only need to liquidate some of your CDs if interest rates move against you. In the best case, you effectively earn double interest. If you don’t want to risk losing money, you can always cover the futures position at some point in the future and buy actual treasury bonds and wait 20 years for maturity. The Angry Trade can be tailored to create the exact level of risk you’re looking for.
As mentioned in part 2, I bought a /ZB contract at a price of 155’20/32. I expect to lose $2000 for every 10bps rise in interest rates in a 20 year bond. The most useful guide to predicting the future path of 10-30 year yields is a multi-decade chart. The yield goes up and down almost like clockwork in a downward channel. Arguably, the 30 year bull run in lower yields is approaching its end and it may seem foolhardy to press long treasuries (especially using leverage) having missed most of the bull run that could have turned us into gazillionaires already.
During the 2018 peak in interest rates, you had Jeffrey Gundlach as a contrarian indicator when he predicted 6% yields on the 10 year. That was my cue to implement The Angry Trade at the time. This time, I find myself mostly agreeing with what Gundlach says, and that’s concerning. He now thinks the Fed can control the yield curve. So what if Gundlach gets it wrong again and yields blow out?
I think it’s extremely unlikely that yields will exceed the 2018 highs. I’m almost certain that we’ll see a lower high. It would be wise to have enough funds accessible to survive a brief spike to 4% in the 30 year yield (as in a flash crash), but I don’t see how the financial system survives a sustained rise in long-term yields. Financial assets would get decimated. Even real assets such as real estate and tangible assets of corporations would plummet in value as they rely on cheap debt. The only thing I see doing well is precious metals because there would be nothing else left to invest in, nothing else left to trust. This would be the scenario when the Wallstreetsilver crowd’s prediction of the silver moonshot would come true. Make 100 times your money. The problem with buying silver now is that premiums are over 15%. However, platinum works just as well. If The Angry Trade fails completely, I’m willing to bet that platinum will explode higher. In part 4, I will delve deeper into constructing an overall portfolio and the overall investment philosophy that The Angry Trade is based on.
The recent peak in treasury yields resulted in a record oversold condition, so any meaningful spikes higher from here will likely meet resistance. With that in mind, the strategy for doubling down is straightforward: Buy 1 /ZB at 2.3% yield (30 year yield or TYX), buy 1 more at 2.5%, buy 2 more at 2.7%, buy 4 more at 2.9%, buy 2 more at 3.0% to go ALL IN for a total of 10 contracts. I set up GTC orders, since the market trades 23 hours a day, so I will most likely not be watching when the levels are hit. The faster and more unexpected the rise in yields is from here, the more aggressively I will go long (I can always reduce exposure on pullbacks). The slower and steadier the rise in yields, the more patient I will be.
There’s an app out there that lets you lend money for 1 day or longer and you can take a rate offer or select the rate you want to get. Borrowers can take your offer or not. According to the hype, you can make up to 5%+ a day, lending your excess cash. I don’t know how legitimate the company is, but it’s a lot simpler than your trade.
It takes me a few seconds to buy a futures contract. It’s not complicated at all. Even taxes are a breeze. At the end of the year, no matter how many hundreds of contracts you’ve bought or sold, you pay taxes on a single number, which is the overall profit or loss. 60% of that amount are considered long-term gain. 40% short-term. It takes hardly any time at all to do the taxes on futures contracts.
You don’t want to be the person lending money when you have banks lending money that they don’t even have. You’re putting yourself at an insane competitive disadvantage using your own money. You want to be the one who is borrowing when borrowing is dirt cheap, not the other way around.
Getting a loan of any kind is complicated. The futures market is the only uncomplicated leverage you can find as a retail investor that I’m aware of. I don’t think they even verify your income, net worth or credit score at all when opening a futures account today (I opened mine in 2009 and it wasn’t hard). They just close out your position when you run out of money to meet your margin requirement. That’s how they control risk.
My trade mostly involves waiting for 2-3 years and watching what happens. Sometimes, I do nothing for months.
Also, big data has a huge edge when it comes to lending. They know how likely people are to pay back. We don’t have the data, but have to trust whoever provides us with the data.
But I find the app interesting from the perspective of a borrower. What happens if I borrow money and don’t pay back? Could this be a way to get more free money?
Been thinking about the 30yr TIP. Maybe we have more than transitory inflation, but the play is the dollar. On the turn your principal has more buying power. Silvers up today.
You will be competing the the Feds voracious appetite for TIPS.
Actually, The Angry Trade works with the dollar as well (sell /6e or /m6e). You get paid to short the Euro and the added benefit is that the CoT positioning has a good track record of predicting the currency market, whereas treasuries are far more unpredictable. If I didn’t have so many dollar-denominated assets already, I’d be a lot more short the Euro as a hedge.
You know…..there was a time that I thought that the leadership of the US was always a step above……and deserved to remain in place. Men like Eisenhower etc.
Then I listen to big time leaders say things like……you know, having our critical parts being made overseas is risky…….after they buy back 80 billion of their own stock in order to enrich themselves by having their options get cashed in for huge unwarranted gains……and offshore the entire industry.
Now I’am firmly convinced we either have a generation of morons running the country or the greatest crooks in history. Either way none of them deserve so much as a middle finger thrown their way. Raise taxes to the moon….see what I care.
These issues being discussed (buybacks, exorbitant salaries to a handful of people, stock options, etc) are a textbook example of Agency Conflict whereby the agents (corporate managers) ignore their fiduciary duty to the principals (shareholders).
I could give a lecture on Agency Theory but suffice it to say that it seems to be happening everywhere. Boeing is the most recent poster child of this problem. Intel seems to be in the same class. GE used two corporate jets when a Jeff Immelt traveled. One jet to transport him and the other was used as a backup in case the first jet had a mechanical breakdown. Nobody objected to this.
When principals never voice an objection to anything, the agents will continue to operate the corporation in a manner that benefits them.
You either act like an owner or you get what your managers give you. It’s that simple.
In the Railroad business they call it “Precision Scheduled Railroading”. “PSR”
Add in the incest of CEOs and their board members. Economist Dean Baker has suggested the following corporate governance process: submit the executive compensation plan to a shareholder vote. If the package fails, any board member that voted for that pay package in committee loses their stipend.
What difference would that make? When Vanguard owns 50%+ of your shares and votes on behalf of the underlying mutual fund holders, why would they rock the boat?
The “Agency” issue cuts a layer deeper as well. Passive low-cost mutual funds and ETFs help to enable the poor management. The shareholder-owners should keep the Board of Directors in line and prevent management excesses.
The “Agency Cost” issue is simply the logical flip (contrapositive) of the idea that if you want a job done right, you need to do it yourself… that is, “If you hire an agent to do the job, don’t expect it to be done right.”
Dropped a line while editing: Passive low-cost index funds are great for investors in the short term, but now that index funds dominate ownership of most companies, there are new Agency issues. Fund managers don’t act the way individual shareholders would because their own capital is not at stake.
There is such a thing as a generational cycle.
The first generational cycle are the innovators. They typically are born during a great crisis and do what is necessary to rebuild after times of disaster.
The next couple generations are the imitators. They do not have the vision or talent of the innovator’s, but at least they know enough to copy what they did.
The final cycle are the idiots who think they are smart enough to change the systems without knowing why they are in place. They have no respect for the lessons of the past and thus cause the next crisis.
If we’re gonna dream how about raising taxes and cutting spending.
Fred-i’ve always understood the perfect criminal commits crimes that are never discovered (at least in their lifetime). This would rule out the second half of your generational comment-are they in the running for ‘most-venal’, however? Absolutely.
may we all find a better day.
AMD’s Ryzen 7- 7 nm chips are a game changer for the PC industry. Intel is still on 14 nm and is struggling to produce its new 10 nm chips. The specs on the AMD Ryzen chips crush intel’s and you have the option of opting out of intels VPRO spy technology which embeds a tiny radio receiver in many of their new chips.
Intel is looking for the US taxpayer to subsidize their research and executive bonuses. They’re black-mailing to US govt by claiming they can get Taiwan Semiconductor to produce their chips. Pay us or we go to China!
Nah, watch America bomb the city of Hsin Chu to smitherens. Heck the Taiwanese might do it themselves.
Seriously though, there won’t be an invasion. The mainland has so far failed to catch up to Taiwan’s semiconductor technological prowess, but at the same time it’s hard to articulate reasons why the mainland will always be behind no matter what.
The mainland is behind because Taiwan has had access to the accumulated knowledge and technology we have developed here in the US. Taiwan’s best engineers ( and it’s president) were all educated at US universities, it has had full access to state of the art chip equipment ( ASLM, Lam Research etc.) and state of the art chip design software ( Cadence, Mentor), and they have been doing it long enough that they have seasoned engineers with decades of experience. The mainland has had to do it mostly on their own as the US has restricted them from getting most of the above things. The mainland only reached the level of technical development to even think about semiconductors in the last 20 years and the best engineers in Taiwan have 30 years of experience. But China now graduates 10 times the engineers we do, and has command of all the basic building blocks needed, so it won’t be long before they catch up.
Do you really think they will? And when?
Taiwan isn’t going to be taken over by China in an invasion. I spent years in Amphibious Warfare in the U.S. Navy and I can tell you that Omaha Beach would look like a picnic compared to what would happen to the PLA if they attempted to cross the 110 miles of the Taiwan Strait.
For starters, no Allied transport ships were attacked during the approach to Normandy… the first shots fired by the Germans were on the beaches themselves. Whereas the Chinese would have ships being sunk by missiles, submarines, and mines for the whole 110 mile transit.
And that is just for STARTERS…
TSMC makes the AMD chips I think. Intel could probably have a 7 nm if they were willing to outsource the manufacturing to TSMC?
Apples chip is 7nm too because it is manufactured by TSMC?
1) If INTC weekly cross Mar 12 2018 inside bar INTC might
reach/breach the Oct 2018 fractals.
2) INTC is < May 28 2018 high.
3) A trend line coming from June 4 2018 high to Apr 15 2019 high blew up Feb 17/24 gap 2020 gap, stopped Jan 18 2021 high and started a big red supply bar on Apr 19 2021.
4) INTC look like a chopped megaphone with a flat bottom.
5) TSMC is down for 5 weeks, inside Mar 22 2021 fractal.
6) AMD might be forming a H&S at the top.
The rental car agencies have been going to used car auctions to buy vehicles for their fleets. If it does not transition to lower inflation, it may transition to higher inflation. Paying top benefits for not working at all, while essential workers risking their lives are paid less.
COVID restrictions have hindered port facilities.
Share buy backs are great for company stock prices. Stocks usually outperform short term treasuries. The government does not buy back treasuries as often as it prints them.
U.S. labor prices are some of the highest in the world. U.S. taxes are rising. Why not build factories overseas? We used to import brilliant students and professionals, the anti-immigrant movement might reduce the supply of skilled workers,
What anti-immigrant movement? Plenty of unwashed, unskilled workers flooding the border. Last I checked H1-B visas handed out like party favors. Even Trump, who promised to rein those in, did nothing about them.
“Even Trump, who promised to rein those in, did nothing about them.”
That’s an exaggeration, although I would agree he should have done more. In 2020 he banned 100,00’s of h1-b visas. Biden allowed the ban to expire- check any major news outlet. (Wolf has a major problem with posting links.)
Trump did not expand the program as Biden certainly will.
The whole point of having a stock market is that companies can raise capital by issuing stock. There is no other purpose to it. So let’s get back to how the system is supposed to work.
Kelptocracy defined.
stoned-explains what’s happened to the one-thick kelp forests off of the CA coast ( a :) for the typo, a :( for both realities…).
may we all find a better day.
Share buybacks used to be illegal, and considered a form of market manipulation. They are a form of market manipulation. They should be severely restricted if not made illegal again. I could see their use as providing for employee stock options but that’s it, and with limitations.
A little off topic, but the WFH craze has created one benefit, the market is now flooded with used business computers at dirt cheap prices. My guess is a lot of companies are dumping the computers from their abandoned office space. I just picked one up for under $200.
Jdog, post a link. I’m in the market for another computer.
Google it.
LOL…
come on now bro! or shall I say “boomer”
Where? I am looking.
ebay or craigslist?
Refurb?
An electronics distributor I worked for in Austin had Intel, we sold 8086/8088 processors, peripherals, and programmed their EPROMs. it was the SOTA line, shame they’ve slid so far,”a couple of years” is forever in that business. Jerry Sanders (AMD founder/CEO/party animal)got a second-sourcing processor agreement from Intel in 1982 and ran with it. Now theirs is better. Moore’s Law (Intel cofounder) has slowed down the past ten years but still applies to catch-up. The lapse in technical competitiveness is bad, but surely many of these chips in short supply are commodity items, production and distribution will slowly right itself, and another major hiccup goes in the books. Never as good as you hope, seldom as bad as you fear. It was gonna take weeks or months to get the stuck container ship out of the Suez, too. Some interesting information here
None of these share buybacks are possible without the FED blowing insane asset price bubbles and creating an insatiable appetite for junk corporate bonds.
When I see Jerome Powell speaking, I see Satan himself. This guy stands up there in front of the entire country announcing that he is hell bent on creating rampant inflation and destroying the middle class and the poor, and nobody even questions him. Not so much as a peep from anybody who matters.
This market is full of ever’s: The most disconnected disconnected from the economy ever, the most long positioned ever, the most margin debt levered ever. The most uncorrected ever. That’s a lot of ever’s that hardly can afford a misstep.
Northman Trader at ZN
– Nonsense. A LOT OF people are giving the FED way too much credit for the current “Everything bubble”. It’s the banks who are creating/have created the bulk of all the credit/debt. On top of that without willing borrowers banks won’t be able to lend all that money.
On one hand, the INTL buybacks have not been wasted… the stock has gone up 324 percent since December 2010… 21 to 68. On the other hand, the S&P has gone up 334% since then as well… 1257 to 4202.
There is certainly no question that Intel ate its feed corn in that time. Even Intel’s leadership is now admitting this. To see how bad, just take a look at AMD’s stock price. From 2011 to 2017 it looked like Intel had made the right moves… AMD’s stock price went from 8 (Dec 2010) to 11 (April 2018)… but then AMD’s stock price just skyrocketed going to 55 before the current crunch hit in the middle of 2020. Now it is at 80 which is down 15% from where it was in February.
In any competitive technology business, “keeping up” isn’t good enough because competitors are always nipping at your heels. They will be happy to take the lead from you if you aren’t focused on keeping it for yourself.
If there is any good news it is that the CEO seems to be taking a hard look. Obviously he would like to blame his predecessor’s mistakes if he can… the iPhone chips being the example I would quote. But that is a pretty hard analysis that Gelsinger gave to CBS. Telling the world that your chips are 30% slower than your competitor’s chips is something most CEO’s would prefer to gloss over rather than address head on.
Don’t forget Intel also failed to compete with Qualcomm on wireless modems. Apple bought that department recently for probably a fair price given they’ll get some patents and tech to make their own in-house stuff.
Intel’s endeavors beyond a largely vendor lock-in datacenter/enterprise domination have been a poor showing. They’re fortunate AMD still has production issue as no doubt most of TSMC’s advanced capacity is secured by Apple. The rest is split between AMD (both CPU and graphics), Nvidia, and whomever else and the bidding starts. Nvidia can also pay a lot more than AMD can.
There is nothing wrong with Warren Buffett 2020 buyback, saving
SPX from : “I am falling and I cannot get up”, but there is something
wrong with Ford $48,000 average transaction with 8Y loans
Rather insiginifcant if more than enough F150 PU trucks roll off the assembly line, how does this affect AI, bitcoin mining and robotics? Corporate America has been quietly automating themselves away from Powells tight labor benchmark (TAPERING!) Two things: admin starts bashing Corporate America over its work slow down, war profiteering and threatens to cut corporate subsidies. He has the corporate tax cut axe which will fall. China makes a geopolitical move.
Gelsinger told CBS : we don’t care about building overcapacity, because we want to save AAPL from a potential blackmail.
Apple ain’t gotta worry. They got m1, baby!!!!!!!!!!! I will let them live after I crash the market!!!!! Hahahahahahahaha!!!!!!
Oh guess TSMC makes m1 too. Thanks Wolf. I have been too busy printing money — BBBRRRRRRRRRR!!!!! And I done forgot to know who make the m1. I’m just glad no one will ever use our lack of interest in keeping our tech advantage against us!!! Hahahahahahahah!!!!!!!!!!!!!
Financialization killed our industrial capacity, meanwhile Belt and Road just humming along.
I call BS on that comment. Put up some evidence. Last I heard, financialization was killing Belt and Road projects too. See e.g. the big road in Macedonia.
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The road is in Montenegro. It’s not the road that is the problem, it’s the financial construct around it. Bad managment and investment strategy, with no financial rationale behind it. It’s not part of the B&R intiative (look at the map and you will see it is not there).
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Since this is not the topic, I will refrain from explaining furhter. What both topics share is that the road in Montenegro and Intel investments are both ill devised, by an inept leadership.
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Everytime I hear someone complaining about the pipes getting $1400, I think to myself “They need to learn a lot more from Corporate, because they are getting a lot more!”
I think there may be one more factor at play which isn’t getting enough attention. We know about pent-up demand, and supply chain chaos, and we know about free-money stim spending, and we know about work-from-home changing the “where do I want to live” equation for millions of people. All of that is disruptive – and also inherently inflationary since a stable equilibrium tunes itself and is inherently more efficient than disequilibrium.
But is there also a deeper change afoot? The global population, after nearly a decade of general economic and political stability, just went through a huge crisis. What’s the mass-psychological impact of coming out of that crisis?
What if COVID + the ensuing chaos has triggered a major psychological mood shift? Will the general psychology shift away from go-with-the-flow passive obedience and “hoping for things to get better” (i.e. stoicism) and back towards active disobedience and nothing-to-lose “seize the moment, do it now, you only live once” opportunism (even hedonism)?
The Everything Bubble created a dearth of investable opportunities offering “security of principal and a reasonable rate of return”, to use the classic definition. COVID brought home the reality that life is short and the future is very, very unpredictable. Was 2020 so extreme that in 2021 and 2022, people will simply not approach their lives in the same way as they did back in 2019?
There’s abundant evidence that the first World War (1914-1918) plus the Pandemic Flu of 1918-1919 triggered a change in mass psychology. Other major events get spoken of as defining generational changes in attitudes. COVID maybe isn’t quite so impactful but after decades of peace and stability, maybe it doesn’t take as big a psychological shock to trigger a historical change in attitudes?
This is a hypothesis but is there evidence? What do you see?
I must be living in a different universe cause I sure don’t see any past decades of “peace and stability”. It has been constant turmoil during my life, now more than six decades.
I do agree that the past year’s turmoil will have profound effects far into the future. Too soon to say exactly what they will be. It is sill very early in World Depression II, Part B (Part A started in 2008).
I see spasms of fiat money issuing simultanously with economic slowdown in western countries due to respect of covid restrictions.
This combination (fiat expansion without economic growth) happens reguarly in human history with the same outcomes: the public and private prosperity suffers.
Finance, economy, moral, politics are affected.
Read Andrew Dickson White’s “Fiat in France 1790s” published in 1912.
Exactly what do you think there is pent up demand for?
privacy? freedom? i could go on and on.
when I graduated from engineering school in 1983 the kids with the best grades went in to finance and consulting because that is where the money was. 20 years earlier they would have gone to Boeing and built the 747 or to Grumman and built the Lunar Lander that put man on the moon . We messed up our priorities a long time ago and are now paying the price.
And the ‘C’ students became public school teachers.
In truth, at my school,in the department of mechanical engineering the kids at the bottom of the class all got jobs at GM. Even the bottom of the class was pretty good as 35% of those that started with us had been flunked out over the 4 years. The story was that GM felt these c and d students ( all our classes were curved to a C in those days) would be grateful for a job and be loyal. So if you wonder where the Pontiac Aztec and Cadillac variable cylinder engines came from, now you know.
Today we have conditioned our kids to think that engineering is something that is done either in foreign countries, or by foreigners who are hired in the US because they are cheap labor.
The smart kids all want to become hedge fund managers.
When working very hard to make good and reliable real products is literally viewed as a foreign concept by the vast majority of US citizens, it is probably too late to revive the dying US industrial base.
The culture change is such that even the young people who *do* study technical subjects all want to invent a bold new idea, very quickly build a company, and then either sell it to private equity or else IPO as fast as they can. The idea of slowly building value over time is seen as something that only a boomer or Gen X-er would believe. So many companies have been destroyed by the professional managerial class and the moneyed class, that it’s just implicitly assumed that most companies won’t last long enough to make it worthwhile to invest time and effort into them. Anything other than making a very quick buck is seen as a bad bet.
I can’t say that they are wrong. They appear to have a very accurate appraisal of the state of affairs in US industry today. Any sustained effort that is made to build lasting value results in a new manager firing all the “old” 35+ year old guys who did the hard work. He then pockets the short-term profits and jumps from the now-sinking ship to pillage another company.
Bingo.
We still do things the old-fashioned way at work. That means slow and steady progress on difficult design objectives to make our product and our processes better. I often feel like an idiot dinosaur in today’s American business climate.
We can still do this because we are privately held. We own the place AND we run it. Of course this has some drawbacks, but the big benefit is that it lets us focus on building something that can last for decades versus stressing about the next quarter to appease impatient shareholders.
I am disappointed at the sad state of our once-great American industry, but the incentives do do right for the good of the country/company in the long term seem to be consistently overridden by the drive to maximize short term performance.
“The smart kids all want to become hedge fund managers.”
A large number of them aspire to the political system which has a more secure future and has a myriad of unique benefits.
The truly smart kids see that the entire system is now being managed like the companies I just described. They want to make a quick killing as hedge fund managers, and then hop on a plane and flee for their lives once the system collapses.
The crypto craze is another Ponzi-ish scheme to quickly extract value, and then run away as fast as possible from the system. The core ideas behind crypto may be quite sound, but the current financial and legal system needs to end before they can be fully implemented.
A young person entering government today will find that there will be nothing left to steal by the time he is middle aged. A career in government with cushy benefits looks like a great deal on paper, but a US government that is borrowing 48% of what it spends during peacetime is not going to survive in its current form for much longer.
Ensign – what you say is true. Very, very sad but very, very true. I fear that the scramble for chairs when the music stops will be very, very ugly.
There are three big foundries that actually generate most of the chips. There’s TSMC, there’s Samsung and there’s GlobalFoundries. TSMC is a provider of everyone’s silicon. And based on the customer relationship that a company has with TSMC ultimately determines what priority they get in that pecking order of what’s available.
The problem is not Intel or AMD. It is the chip builder / foundry
“TSMC, the world’s largest contract chipmaker, including for Intel, and a large supplier of chips to the automotive industry”
Both TSMC and Intel are as good as irrelevant to auto industry.
Only 3% of TSMC chips are used in autos.Intel total yearly revenues are about $72B of which only $700M are generated by auto-related chip sales.
Auto chip market is dominated by 7 players:
NXP Semiconductors (Dutch)
Infineon Technologies (German)
Renesas Electronics (Japan)
Texas Instruments (US)
STMicroelectronics (French-Italian-Dutch,division of Thomson)
Bosch (German)
Delco (US,division of GM)
I was thinking about hoarding Bosch ECU’s (Engine Control Units) sold on Alibaba for $300 each but the 1000 ECU minimum order made me reconsider ?
I believe Andrew Carnegie was constantly in trouble with shareholders because he plowed earnings back into the company instead of into dividends. Imagine if buybacks were possible back then (way be they were). I’m sure shareholders would have hung him from the nearest lamppost. Surely coming up with a happy medium isn’t that difficult. May be it’s a sign that greed is overwhelming fear. I can’t imagine what happens to risk assessment when fear leaves the room.
“free market” corporate america is a scam on the american taxpayer.
Corporate america is a ponzi scheme where they get $50 billion in taxpayer subsidies and redistribute it to the billionaire shareholders.
It’s a scam! Tax the rich!
This is NOT FREE MARKET CAPITALISM!
The Fed and the Pols have ruined a beautiful mechanism.
Intel stock has been stuck in a 21-year trading range. The stock is nothing more than a mangy, flea-ridden, tic-infested dog. And that goes for the company too. It used to mean something to be an Intel Fellow. Those ranks have been diluted.
For the LBGTQ+, non-white, non-male RCG, there are “Silver Bullet” requisitions waiting to be filled.
1) Breaking news : Pat Gelsinger flew to Israel and confirmed that Intel
has began building a new fab near it’s existing fab 28 plant, 10 miles from Gaza, for a toltal of $10B. Also additional investment in mobileye near Jerusalem and it’s R&D center in Haifa.
2) Intel employ 14,000 employees in Israel and are looking to add 1,000 new engineers for their campus in Haifa.
3) Haifa is 20 miles south of Lebanon.
4) Peace.
I live in the town in Oregon with Intel’s largest operations, ( 20,000 + employees) and its’ most advanced fab ( D1x mod 3) nearing completion. We have the water resources and power that Arizona, Israel and Taiwan can only dream of. But after 40 years Intel has worn out its game of demanding handouts. They are still treated well and receive the benefits they deserve but the free money is gone so they are moving on to some desert locations. I for one will enjoy a nice 10 year wind down in Intel operations and a return to the rural nature of the county I grew up in before Intel showed up.
10 miles is doable for a homebuilt. 20 miles not so much.
5) TSMC fabs are 70 – 100 miles from China.
Saber rattling by China is NOT new!
Taiwan is NOT HK!
The global fabs are on several fault lines.
6) Samsung is…
Wolf,
I think you meant to say this:
“semiconductor plants shut down”
Instead of:
“semiconductor plans shut down”
~Dingleberry
Yes. Thanks.
WHY the Buy-backs are bad for the Economy?
“Corporate suicide.” That’s how two researchers, Robert Ayres and Michael Olenick, are now describing the stock buyback boom in the U.S. economy
It’s been my long-standing contention that buybacks are bad for the U.S. economy, and extremely dangerous for unsophisticated and long-term investors. Why? Buybacks may inflate short-term earnings for the benefit of corporate executives and savvy activist hedge funds, but they harm long-term shareholders—like pension funds and retirees—because they allow managers to siphon away corporate cash that could have otherwise been spent on innovation, employment, wages, or expansion that would ensure the future success of the business.
Forbes
Buy-backs have represented on average 85 percent of corporate earnings since 1998, according to analysts at S&P. And stock repurchases worth almost $2 trillion have helped buoy the bull market since March 2009, according to FactSet data compiled for CNBC.
While a good low-risk bet for the C-suite, the reluctance to boost capital investment in operations, people and product has left companies with the oldest plants and equipment in almost 60 years. The average age of fixed assets reached 22 years in 2013, the highest level since 1956, according to data compiled by the Commerce Department, as reported by Bloomberg and S&P.
I don’t know about Y’ALL, but I like share buybacks!!! Keeps the Dow JACKED!!! This makes me look GOOD like I know what I’m doin’ or sommethin’. Once my term is up I will let it CRASH after me and my homies SELL. Then once it’s low again we will all BUY again!! HAHAHAHAHAHAHAHA!!!!!!!
Just look what happened to all the buy backs at Boeing and Intel!!
How about for every dollar of aide, tax break, and bailout, a same dollar amount of stocks have to be handed to the Treasury?
Or, a similar dollar amount of products have to be provided to the U.S. government, no charge?
India replaced US engineers. India is our banks backbone.
What will happen to silicon and wall street when India caught a covid
There’s always China ;)
Vietnam is another attractive place. South East Asian unicorns prefer Vietnam to India.
With the exception of the huge share buybacks US industry is following broadly the same historical path as UK industry of the 1960-1980 period, and it will end very much the same way, the underlying reason is the same, people, it is people who build, and people who destroy, rags to riches, to rags, 50 years from now China will be starting the back to rags part.
2B- very well-said.
may we all find a better day.
“We believe it’s going to take us a couple of years, and we will be caught up,” he said.
Given the amount of riff-raff that percolates in USA, I just double this timeframe and add another year…..so they will be caught up in five years, not “a couple”.
The thing with semiconductors is that they’re a moving target. For Intel to catch up in two years, it has to be in two years where the best in the semi industry will be two years from today. That’s a lot harder to do than getting in two years to where the best in the semi industry are today.
It’s worse than that because advances in semiconductor manufacturing is not linear.
Rather than trying to catch up to TSMC, Intel should do a moonshot. Come up with a different kind of chip. In reality it’s impossible though. Basically they’ve lost so many good people thanks to the MBAs, they probably will need to rebuild the engineering department/culture from scratch.
Move photons instead of electrons?
Of course it would be the MBAs who would deem it their job to “rebuild”. Should go well.
They wanted to stack chips (Foveros) but TSMC is also looking at that direction (3DFabric?). The node disadvantage makes it that Intel being behind will always suffer a performance penalty in speed and also heat. I have a M1 Macbook Air and it’s just ridiculous how much faster and cooler it runs compared to the outgoing Intel chip for about the same power envelope. Not to sound like a shill but it’s quite possibly my favorite machine and I’ve probably gone through a dozen various processors in the last five years.
So even if Intel advance in stacked chips, there’s only so much 10nm can do against 5nm or 3nm. And that’s before TSMC stacking. The competition is not sitting still. If the ASML EUV machine embargo wasn’t a thing, China would be running its own fabs at sub-10nm too.
The MBA thing feels the same in most big companies. It’s kind of like how universities hire administrators at some absurd ratio compared to faculty. What do these administrators do? Not much for the company’s future but they need to be paid. Same goes for huge sales/marketing departments in a more R&D centric business. AMD Epyc? Ryzen? Probably a small department but their results are real-world tested.
I guess we can call it American exceptionalism to think no one else can beat us. Take a look around, the only thing this country really excels at is increasing wealth disparity and corporate welfare. Probably a bunch of yes-men trying to keep their jobs before jumping ship with a better offer. And why they worry? Golden parachutes are anticipated.
The answer is to let it all melt down. Stop the insanity. No more forbearance programs, no more paying people to stay home, no more bailouts of any kind, no more QE, time to start raising rates, etc. That will bring more vehicles and products to market than there is a market for. There are plenty of vaccines for those who want them. Time to go back to work and stop all of this fakery that is destroying the country. The cure is worse than the disease.
Well, said, DC,
“There are plenty of vaccines for those who want them.”
I was picking up my wife’s prescription in Walmart the other day and the clerk asked me if I had my Covid vaccination yet. I said we got both shots in January. He said they have a load of vaccine and are looking for folks who need the dose.
Capitalism is what we champion! Now, the age of klepto capitalism is long arrived in AMERICA. What is needed is simply PUMP UP share price, either issuing debt or from corporate profit if there is. Any tangible, physical work is no longer needed. Once the economic havoc hit, wait for GOVERNMENT BAILOUT! UNCLE SAM would asks FEDERAL RESERVE to create whatever is needed. It repeating itself and the world are watching how the ANIMAL SPIRIT turnout just a modern day LOOTING.
Capital. That is what it is all about. Plant and equipment is being offshored just as US capital is also. Every dollar in negative balance of trade, is a dollar in capital that is being exported.
Every dollar spent on larding executive and investor pockets in buybacks is a dollar lost from the corporate treasury to hold the stock of a company that is not investing capital in its future.
What has happened is that the MBAs have descended as locusts on US industry armed with spreadsheets to stip future investment into share options to pay them for their spreadsheet magic and legerdemain.
We need to learn how to pay our bills and not borrow away our future.
Years ago Ralph Nader wrote a screaming editorial against buybacks. Wish I could find it now.
What do subsidies have to do with FREE MARKET CAPITLAILSM?
Croney…
What the phone number to call for the deal that Elon Musk got from Obama? And Solyndra?
Now they all want the free money from the Fed Well spring…
Notice J Powell? Care, J Powell?
“Intel currently doesn’t have the know how .. ”
Boy .. they have really let themselves go ..
Where they planning on retiring from the business only that it went horribly wrong ??
I’m sorry but I wouldn’t be giving them 10 cents ..
Intel’s catch-up will take 2 years ..
2 years is a hell of a long time & to the tune of how much money exactly ??
By that time technology will have advanced even further.
& then what ??
Another catch-up ??
Maybe the inspiration was lost at Intel .. maybe all the bright sparks left & Intel became sedentary.
I hope it works .. but it could be flogging a dead horse.
Nearly 100 companies in the Fortune 500 had an effective federal tax rate of 0% or less in 2018, according to a new report.
The Sorcerer’s Apprentice ..
(Die ich rief, die Geister, / Werd’ ich nun nicht los – The spirit that I summoned / I now cannot rid myself of again,) which is often used to describe someone who summons help or allies that the individual cannot control, especially in politics.
Akin to selling your soul to Satan.
?
Rest in peace Intel. It’s been emotional.
P90, P133, P2 300, P3 450, C2D, 2500k, 4770k.
Probably too far behind now to make a proper come back.
Intel to invest $20bn to catch up, in just a few years… after decades of underinvestment… then TSMC announce a $100bn investment to stay ahead!
Intel will never catch up. They’re spending public money to keep the show going for a bit longer.
It’s all about the show these days, rather than the reality.
Pretend and extend.
4004, 8008, 8080, 8086, 80286, 80386 …
There was a time when Intel innovated.
1) It’s not about water or electricity. Our enemies salivate, because they can easily catch up US by striking Israel’s high tech industries, including Intel, MSFT, IBM…from a short distance. They can bend our will, humiliate us, disrupt us, causing shortages and we can do nothing about it.
2) Intel is a classic case of sustaining strategy, while low end disruptions catch up with them. It takes time for the low end to improve and become better. After another period of time they became high end, leaving the dinosaur behind. Innovators developed new markets, new products and serve new customers.
3) Buyback lifted the FANG divorce rate to 75%.
A company being subsidized by taxpayers, because it is too big and strategic to fail, started a long time ago.
“Drowning in debt, in 1971 Lockheed (then the largest US defense contractor) asked the US government for a loan guarantee, to avoid insolvency. Lockheed argued that a government bailout was necessary due to the company’s value for U.S. national security. On May 13, 1971 the Richard Nixon administration sent a bill titled “The Emergency Loan Guarantee Act” to Congress requesting a $250 million loan guarantee for Lockheed and its L-1011 Tristar airbus program.”
Having been a politically radical young man at the time, and living my early life in silicon valley, it was a real WTF moment for me.
The entire military industrial complex is a welfare system for govt contractors. It’s unfair to single out one company for receiving a bailout, when every contract is a bailout of the system.
Nah, the MIC is a work/study welfare program for engineers. Like the DOE.
Thanks for this article Wolf. It is eyewatering, how a nation, which was the most technologically advanced nation in the world, comes up with such sentences as: “And anybody who looks at supply chain says, ‘That’s a problem.’” It’s a problem, he said, “because relying on one region, especially one as unpredictable as Asia,” where 75% of the chips are made, “is highly risky.”
Intel used to be “God” and now its just a company, which can not even produce a chip of the Taiwanese level.
This is a disgrace, but it shows a mindset of the current elite, which came to live in the 90s. Who needs R&D, when you can reduce costs by exporting know-how to the East and then “get f.ck.d” by the ones, who work for you.
When I see stories like these, it’s just sad. In 30 years the US is over. You can not come back from this. 20 billions, 30 billions … it doesn’t matter, the knowledge, the knowhow is lost.
Famous corporate last words.
Why did you destroy it?
“It was profitable in the short term.”
Why would you expect MBA PhDs to see this coming? /s
Not to worry, the “New Carter Administration on Steroids” will take care of everything. Even Uncle Warren Buffet says so.
Brrrrrrrrrrrrrrrrrrrrrr…..
Instead of Intel hiring CEO Pat Gelsinger, that guy with the sex toy company seems to have more forward-thinking.
Do Intels chips even work in sex toys?
Gotto be careful – those sex toys might be collecting data on you.
Katana Graph Secures $28.5 Million Series A Financing Round led by Intel Capital
PRESS RELEASE / BYKATANA GRAPH
FEBRUARY 24, 2021
https://katanagraph.com/news/series-a-round
Not to worry. We can reduce delivery delays by eliminating some of the post-production testing to which chips are subjected. Do we really need them all? Always worked for my management, and at a number of different companies too!
Is this the year Moore’s law dies?
How do you say ‘too little, too late’ in American?
What a story. This is so typical of Western societal attitudes. Intel, no doubt, thought they would be top ‘chip’ dog for ever in their little duopoly with Amd.
They just don’t get it. It’s all about the engineering imperative, a relentless, never ending, flat out drive to be best at what you do. The Asian engineers have taken over this mantle on almost everything for at least the last 15yrs. Yeh! Apple ‘designs’ the flashy Iphone but they can’t actually make any of it at anywhere near the price Asia does. It’s fabulous production engineering that no-one else can match. Even the Germans have stuff made in China to reach their price/quality targets. You can write it off as low wages if you want to bury your head in the sand but the chances of Intel ever catching up are zilch. You can’t ‘rest’ out of this race and get back in. No chance. You’re dust.
We are all so arrogant in the west, we think these are backward countries that need our wisdom and expertise, whereas they left us far behind ages ago.
Our Bozos have effectively cut Huawei out of 5G on some trumped up spying BS. Huawei IS 5G, so we are doomed to languish years behind for years in this field. The Bozos say things that are so technologically dumb, like we’ll develop our own 5G ability, meanwhile China is developing 6G. Their engineers must be laughing at us big time. They’ve launched their own space station because we won’t let them on ours. The Russians are building a new station of their own because they are p*ssed of all the BS they get from US politicians. If you don’t run as fast as you can you’re yesterday.
“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” – The Red Queen (L Carroll, 1871)
LH
Very apt indeed.
Nothing new under the Sun.
I don’t think it was a coincidence he was writing in the ‘heat’ of UK’s industrial revolution.
“because relying on one region, especially one as unpredictable as Asia,” where 75% of the chips are made, “is highly risky.”
Hm. Then why’d we send our entire manufacturing base there over the last 30 years?
Well, so far, nobody has mentioned Brian Krzanich, the Intel CEO who was responsible for most of that stock buyback period, as well as overseeing the grotesque engineering failures that led to Intel falling behind TSMC in further die shrinkage.
It was the usual stupid American corporate story of spending your huge profits to inflate the stock price and keep the shareholders happy rather than plowing it back into the difficult engineering needed to make the smaller dies work.
Intel first got stuck with getting its 14nm process to work on time, and then never really got going with its 10nm process, mainly because they decided to try to forgo going to the difficult next step of the using EUV processing, which TSMC had immediately plowed millions of dollars of R&D to get to work
And oh, Brian Krzanich, a married man with two daughters, was also heavily invested in a “consensual relationship” with another Intel employee through all that time. So his eyes and mind were focused on something else.
There are so many epithets that I would like to throw at this *&^%$# A-hole, but they won’t get past the filters.
He personally ruined Intel. He is at fault and should be tarred and feathered and driven out of town on a rail.
It will be interesting to see if Gelsinger can bring Intel back. He seems to be trying. I for one wouldn’t mind if the USG helps Intel back, as long as they promise to never buy back their stock again. We need an American chip manufacturer to compete with TSMC and Samsung.