The media are tangled up in their own underwear about this deal, while totally onboard with sacrificing taxpayers on the altar of Biden’s policies.
By Wolf Richter for WOLF STREET.
The Trump Administration announced on Friday that it had extracted a 9.9% stake in Intel, valued at $11.1 billion, in return for the $2.2 billion in grants already paid to Intel under the CHIPS Act, plus $5.7 billion in grants to be paid under the CHIPS Act, plus $3.2 billion to be paid under the Secure Enclave program, which were passed by Congress and signed into law by Biden in August 2022.
So the Biden Administration’s gift to Intel, paid for by taxpayers with love, is now getting converted from a gift into a stake in the company. Intel will issue new shares to the government, which will dilute existing shareholders. But existing shareholders shouldn’t complain, they’re still getting the cash that the Biden Administration had promised them. Intel is expected to do great things in the US with the cash.
If Intel fails, and its shares go to zero, taxpayers will be no worse off than under the Biden deal. But if it thrives and the shares retain their value or gain value, taxpayers are far better off.
Taxpayers were shanghaied into paying Intel $8.5 billion in grants under the CHIPS and Science Act plus paying Intel a separate $3.5 billion in grants under the Secure Enclave program, plus lending Intel $11 billion, totaling $23 billion in subsidies, of which $12 billion would be cash gifts. Other chipmakers were awarded smaller gifts. The purpose of the CHIPS Act was to stimulate the construction of chip manufacturing plants in the US. Intel’s details were announced in March 2024.
At the time of the Intel announcement, I said:
“We just relish [sarc] those government handouts on a massive scale to the richest companies – sure, we get it, it’s good industrial policy and important for national security to put research, development, and manufacturing of the all-important semiconductors back onto US soil. But how about hitting foreign and US companies that import semiconductors and other products to the US with huge tariffs to pay for the subsidies? But no. So folks, hang on to your wallets. Just kidding. We’re going to borrow it. We’re going to throw it on top of the $34.5 trillion we already owe, and no one is even going to notice it.”
That was in March 2024. The debt is now over $37 trillion.
The actual funds would be disbursed over time in phases upon reaching benchmarks and production goals. By now, Intel has received the first $2.2 billion of the free gifts from taxpayers – thank you, I love you.
These handouts from taxpayers to semiconductor makers were part of the Biden Administration’s industrial policy and national security policy to induce chipmakers to produce semiconductors in the US, rather than in Asia.
And the media were fine with the taxpayer handing some of the richest companies in the world, foreign companies too, tens of billions of dollars in cash gifts to produce in the US. And Wall Street and the companies – the biggest welfare queens of all times – were fine with it too, obviously, because they were getting these taxpayer handouts.
The Trump Administration – after implementing the tariffs I’d clamored for – has largely continued the CHIPS Act, but in rebranded format, and is now trying to actually get something in return for those gifts, so that this taxpayer money doesn’t just get transferred without trace from taxpayers to big companies and their shareholders.
Yet, the media are getting tangled up in their own underwear about this deal, while they were totally onboard with sacrificing taxpayers on the altar of Biden’s policies. That tells you something about who the media root for – it’s not the taxpayer, but Wall Street and the shareholder class.
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You do understand how active ownership of a company in exchange for funding can send a signal to other companies and also influence operations of said company which is different from a one-time grant? Are we China now?
These are the biggest welfare queens in history, benefitting from huge taxpayer wealth-transfers under the Biden administration, and Trump extracts shares from Intel for this cash, and I have to read your BS here? Where were you when the Obama administration took huge stakes in GM and many other companies, including Wall Street banks? We’re not in China, but sometimes when I read the comments, I think we’re in an insane asylum.
Wolf. Is it perhaps okay to say the level heads that actually do exist in this country would say two wrongs don’t make a right?
Where are our politicians that are true balanced budget (or deficit growth at least in line with GDP growth), open market, easy permitting, tactful regulation, and defenders against monopolistic behavior?
The GOP had a few promising folks rising up in the 2010s, but they got run over by the Trump freight train.
And if companies don’t want the government as a shareholder, they can refuse to take taxpayer cash. Just say no. Taxpayers would love that.
Intel lobbied for the CHIPS act and the Secure Enclave program. It’s not like Intel was forced to accept $23 billion from taxpayers, lol
Allow me to clarify. It was bullshit under the CHIPS act, and it’s bullshit now. If intel cannot compete, thy need to die already.
You’re a fool. Good riddance.
Who is?
Wrong then, wrong now. What defines “too big to fail” or “too important to fail”?
I wonder how company behaviors would change if every single company getting free money including incentives given to consumers to buy products (like cars) had to convert that money into USG ownership. Would they ask for less or ask for more?
I think they should make INTC follow the Strategy (formerly MicroStrategy) approach but instead of issuing debt to buy BTC they should issue debt to buy Trump coins…only seems fair. 😁
People don’t judge someone’s actions in a vacuum. They look at things through the lense of your reputation. Compare Obama’s reputation vs Trumps and I think you will get it.
…so half the country thinks Obama/Biden have a “good reputation” and the other half thinks Trump is making good business decisions. Not sure where that gets us…but the respective echo chambers are having good time.
Great point made, thank you.
Point taken. But both actions were and are wrong.
The majority of Intel chips are used in personal computing devices like desktops and laptops, and in servers and data centers. Intel lost the AI race, and in a half dozen yrs laptops will be obsolete. Intel is on the wrong side of the curve and so are our $Billions…unless the government bails before it goes out of biz. This ain’t your father’s Chrysler government bailouts of 1980 and 2008-2009. And those were loan guarantees!
I see this as a bailout. Intel must be in FAR worse shape than management is telling investors. Big surprise there, right??? They’re still competitive in PC/server x86 chips. But as you mentioned that is a declining market. They’ve lost their leadership in chip manufacturing, and they probably will never be competitve there again. Taiwan and korea have the economies of scale that you need to be the low cost producer.
It’s sad that this company needs to become essentially the producer of vital weapons tech that the neocons want to ensure the military can’t be held hostage to foreign producers. Not investable, in my opinion.
“I see this as a bailout.”
BS. Intel does NOT get any new money. It’s the continued CHIPS Act deal, except Intel and its shareholders now have to give taxpayers something in return and existing shareholders are getting diluted. Read the article.
True that !
So much of the media is in the pockets of Corporations ( because of advertising?) , doesn’t matter if left or right .
Government should just let Intel go bankrupt. It lost $18B in 2024 and has missed the boat so many times – mobile chips (went to ARM), new laptop chips (Apple Silicon and others took their lunch), GPUs (Nvidia/AMD), AI (everybody). Intel is Kodak, Xerox, Stellantis, Boeing. Just badly managed.
This is Government Motors 2.0 again.
Yup.
“This is Government Motors 2.0 again.”
That happened in 2022-2024 under the CHIPS act, a Biden deal.
Intel was going to get their unallocated CHIPS and Secure Enclave cash, even if they had not issued new stock to the government. How does Intel benefit from this? Meanwhile, existing Intel shareholders had their equity diluted by roughly 10%. Can someone explain how Intel benefits by diluting it’s stock in exchange for (pardon my ignorance) zero additional cash with which to secure new plants and equipment?
Jon from the excellent YouTube channel Asianometry advocated for an interesting idea to save Intel in a video he posted yesterday… if the government is going to force things on these companies (e.g., a stake in Intel, an export tax on Nvidia) then pressure Nvidia to allow Intel to second-source Nvidia GPUs, the same way AMD second-sourced Intel chips back in the 1980s and 90s. Given the backlog of Nvidia products, this is actually not a bad idea that’s I think is worth looking into.
Trump can blame himself for the coverage.
He has a private Crypto Currency ripe for abuse, he’s settling frivolous lawsuits from media companies, and he’s got CEOs dropping gold bars off as gifts. He reaps what he sows for not caring about the “appearance of impropriety” in his various actions.
Tweeting that the Intel CEO must resign a few weeks back doesn’t help either!
If the prior president did it it’s a good thing, and if the current president does it it’s a bad thing, even if the two things are the same thing.
/s
Seems more like an observation than sarcasm
Subsidizing a has-been!!!???…don’t we do that all the time??? Note our 46th…a has-beeen politician elected to the US Presidency…PJS
The U.S. Constitution doesn’t give the federal government the ability to own shares in a corporation.
Its been a bit since I read the constitution but does it give the government authority to give away tax dollars to private companies?
Lori Logan: “So, I believe bringing reserves down gradually, while also making our ceiling tools available and encouraging market participants to use them when they are economically attractive, will be an effective strategy in the United States.”
Logan’s right. Drain reserves while lowering policy rates. The 1966 Interest Rate Adjustment Act is prima facie evidence.
Nothing says capitalism like a bunch of bureaucrats at the fed telling us what all the prices should be and another bunch of bureaucrats in the government taking our money and investing it for us. What happened to that strategic crypto reserve thing anyway? We need that too. A government hedge fund that buys Fartcoin and Intel shares with my money. This is exactly what the founders had in mind btw.