US Government Takes 10% Stake in Intel
Kif Leswing (via Hacker News):
Intel, the only American company capable of making advanced chips on U.S. soil, said in a press release that the government made an $8.9 billion investment in Intel common stock, purchasing 433.3 million shares at a price of $20.47 per share, giving it a 10% stake in the company. Intel noted that the price the government paid was a discount to the current market price.
Of the total, $5.7 billion of the government funds will come from grants under the CHIPS Act that had been awarded but not paid, and $3.2 billion will come from separate government awards under a program to make secure chips.
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The government will also have a warrant to buy an additional 5% of Intel shares if the company is no longer majority owner of its foundry business.
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Earlier this week, Intel announced another major backer, when SoftBank said it would make a $2 billion investment in the chipmaker, equal to about 2% of the company.
Intel will continue to deliver on its Secure Enclave obligations and reaffirmed its commitment to delivering trusted and secure semiconductors to the U.S. Department of Defense.
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“As the only semiconductor company that does leading-edge logic R&D and manufacturing in the U.S., Intel is deeply committed to ensuring the world’s most advanced technologies are American made,” said Lip-Bu Tan, CEO of Intel.
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The government’s investment in Intel will be a passive ownership, with no Board representation or other governance or information rights. The government also agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions.
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The existing claw-back and profit-sharing provisions associated with the government’s previously dispersed $2.2 billion grant to Intel under the CHIPS Act will be eliminated to create permanency of capital as the company advances its U.S. investment plans.
On the one hand, this seems to come out of the blue, but it’s kind of just making Intel’s implicit quasi-government status more explicit. In addition to being a direct military supplier, Intel is at least as strategic as GM was during the GFC, and no American government is going to allow it to fail. It’s not clear to me how much strong-arming the deal required. With the funds already committed, you could look at this as the government just taking shares that were not part of the original CHIPS deal. What Intel is getting in return is the removal of some restrictive conditions, in exchange for essentially non-voting shares. Is that worth more than the dilution to shareholders? Did Congress authorize this? What happens from here? Maybe the government becomes a long-term partner, and maybe it’s not such a silent partner in reality. Maybe, with the provisions removed, Intel starts buying back shares, the stock price goes up, investors are happy, and the government sells its stake that “cost nothing” and claims victory.
Previously:
- Apple Announces American Manufacturing Program
- Making Apple S9 and A16 in Arizona
- Pat Gelsinger Out at Intel
- Intel Foundry
- AMD vs. Intel
Update (2025-08-26): Tobias Mann:
From the sidelines, it’s hard not to see this deal as extortion. The President after all was holding all the cards. Intel has received just $2.2 billion in subsidies owed under the Chips Act so far, and with the division burning through $3.17 billion a quarter as it strives to enter the foundry business in a big way, Chipzilla could use as much capital as it gets.
Yet, the move shouldn’t come as much of a surprise for anyone who’s been paying attention. Trump played a similar game back in March when he used the specter of massive semiconductor tariffs – which still haven’t materialized – to scare TSMC into bolstering its US investment to the tune of $100 billion.
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All the cash and tax breaks in the world won’t change the root cause of Intel’s trouble: the company can’t seem to convince anyone of consequence to let it fab chips for them. Not even Intel’s product teams seem all that thrilled about its building chips in house anymore. Over the last few years, Intel’s Product divisions have become increasingly reliant on TSMC for manufacturing. In fact, most of Intel’s current portfolio is now outsourced.
See also: this thread with Ben Cohen.
Update (2025-09-02): Nick Heer:
Near the end of Patrick McGee’s “Apple in China” sits a section that will haunt the corners of my brain for a long time. McGee writes that a huge amount of microprocessors — “at least 80 percent of the world’s most advanced chips” — are made by TSMC in Taiwan. There are political concerns with the way China has threatened Taiwan, which can be contained and controlled by humans, and frequent earthquakes, which cannot. Even setting aside questions about control, competition, and China, it makes a lot of sense for there to be more manufacturers of high-performance chips in places with less earthquake potential.
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The rest of the world should see these massive investments as an instruction to build up our own high technology industries. We should not be too proud in Canada to set up Crown corporations that can take this on, and we ought to work with governments elsewhere.
This is a gift link because I think this one is particularly worth reading. The headline calls it a “long, painful downfall”, but the remarkable thing about it is that it is short, if anything. Revenue is not always the best proxy for this, but the cracks began to show in the early 2010s when its quarterly growth contracted; a few years of modest growth followed before being clobbered since mid-2020. Every similar company in tech seems to have made a fortune off the combined forces of the covid-19 pandemic and artificial intelligence except Intel.
Lincicome and all of the other critics of this deal are absolutely correct about all of the downsides. The problem with their argument, however, is the lack of steelmanning, in two respects: first, Lincicome’s Twitter thread doesn’t mention “China” or “Taiwan” once (the Washington Post column mentions China, but not in a national security context). Second, Lincicome et al refuse to grapple with the possibility that chips generally, and foundries specifically, really are a unique case.
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In my case, I had been worried about Intel ever since they missed out on mobile, which meant they missed out on the associated volume that came from making chips for every smartphone in the world. Volume is critical when it comes to managing the ever-expanding cost of staying on the leading edge: as the cost of fabs has surged from hundreds of millions to tens of billions of dollars, the only way to fab chips profitably is to have enough volume over which to spread those massive capital expenditures.
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What is worse is the tree that wasn’t planted: the real payoff from Intel building a foundry business in 2010, or 2013 as I recommended, is that they would have been ready for the AI boom. Every hyperscaler is still complaining that demand exceeds supply for AI chips, even as Intel can’t win customers for its newest process that is actually best-suited for AI chips. The company simply has too many other holes in its offering, including the sort of reliability and throughput that is essential to earning customer trust.
Nor, should I add, the actual success of their products—their top consumer CPUs have been plagued with issues over the last couple of years, and, rather ironically, their most successful products (by volume) are the new low-end Alder Lake chips that have been quietly flooding the Mini-PC market, even as AMD take the most profitable niches.
Previously:
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This is an interesting and somewhat loaded sentence: “the only American company capable of making advanced chips on U.S. soil”
A lot of history and implications there. How the heck did we get to this point? I grew up being told microprocessors were the most important innovation in human history and only the genius of America could have brought it to the world.
And now we come to this, where they are being partially bailed out by the government to fulfill bare minimum obligations while being heavily invested in and run by foreign companies. The board can’t find anyone who wants to captain the sinking ship.
And even this news is not enough to bring their stock out of the toilet it has been in for years.
Sad thing to see. The bailout of the car companies and mortgage companies was gross to see, but Intel doesn’t have the advantage of a century of government incest. And I don’t think it’s going to save them. At this point Intel is completely leaderless and rudderless. They have no vision. No amount of money is going to help when the people in charge are just financial caretakers trying to make a profit. They dug themselves too deep a hole for far too many years.
Anyway I’m just ranting now because this upsets me, it didn’t have to go this way.
@Bart Yeah, it seems like there’s a decent chance that this is too little too late and doesn’t really fix any of Intel’s core problems.
Intel gave up on its aspiration to be a market leader in chip manufacturing when they fired Gelsinger. While it is sensible for the US government to take an ownership stake in Intel, this should also come with the requirement to change Tan's strategy, which appears to be to shrink the company and focus on profitability, rather than targeting the very high end of the market.
And the investment should be higher. Ten billion is nowhere near enough to make a real dent. TSMC invests around 40 billion every year in R&D.
This is socialism. Why can we have socialism for Intel but not for American healthcare or free college?
This won’t accomplish anything except poison Intel’s brand in a new direction while the existing poison continues soaking in. Another artful deal.
> What Intel is getting in return is the removal of some restrictive conditions
I’m curious what these restrictive conditions are, and are they related to intel’s non-competitiveness in the modern market?
@pirijan I don’t have the details in front of me, but I think Intel was forbidden from doing stock buybacks and had to share profits with the government for a while. These were relatively recent (part of CHIPS) so I don’t think they made it non-competitive. Maybe they suppressed the stock a bit.
Notable Bay area tech companies have been funded by US intelligence agencies dating back to the 1960s. I view this action as admission that Intel Inside = NSA Inside. They're not yet ready to lose one of their biggest hardware backdoor manufacturers.
I'm certain AMD and other chipmakers (including Apple, which is a PRISM company) are also compromised. But Intel seems to have had the most security disclosures and severe disclosures over the last decade. I don't think that's coincidence.
@Hammer an interesting point, and to me makes me think of the conflicting duties of the NSA. To spy on foreign adversaries, and protect American interests from foreign spying.
The flip side of your point is that they may want to keep them around as the only company with which they can control the supply chain for themselves. Now I think about what the NSA themselves know about what goes on in Taiwan.
