US support is ‘essential,’ but equity stake raises concerns

00:00 Speaker A

When we look at the landscape of the companies that have taken chips act funding, who should we be zeroing in on now as now potentially having some kind of partnership with the government?

00:15 Speaker B

Well, obviously I think you would probably look at the US-based ones because I think it’s going to be pretty hard to convince TSMC and other country companies from outside the US for some of these deals. Um but so I mean it’s going to be Micron, there’s Global Foundries, uh there’s uh TI to some degree, although they got a much smaller amount. So I mean, I think that’s probably where it ends up. But look, I mean the bigger issue that we have to be talking about is is this really the right thing? I mean, you know, the government has given subsidies to farmers and to all kinds of other industries and there’s never discussions of payback and investment there from a an earnings perspective. And I think it raises some very serious questions that we need to be thinking about because there’s potential long-term implications here that I don’t think are very good.

01:50 Speaker A

Um on that front, I was struck by uh a column from uh Greg Ip in the Wall Street Journal that had was out about 10 days ago, even before this latest round of talk about about Intel. And he wrote, a generation ago conventional wisdom held that as China liberalized, its economy would come to resemble America’s. Instead, capitalism in America is starting to look like China. And Gotham, I want to bring you in on that. Um companies don’t seem to be raising a big ruckus here because those that have have gotten, you know, sanctioned in various ways, right? So, how do you think this this will work between the government and Intel or whoever else?

03:12 Gotham

Yeah, companies are objecting because they’re afraid. Like it’s really just that simple and CEOs of major corporations think of themselves as some of the most powerful people in the world and in many ways they are. But if you compare even the most powerful CEO, the biggest company in the world to the President of the United States, you’re looking at an you’re looking you’re comparing a pygmy to an elephant. There’s just not even a competition. And so this is a president who’s demonstrated over and over again that he’s willing to use the powers of the federal government, even illegally use the powers of the federal government to punish people who he doesn’t like and he do who disagrees with or, you know, on a whim. And CEOs individually are all saying, look, I can’t play that game. Collectively they might be able to stand up to him, but strikingly the organisms of collective action, the Chamber of Commerce, the, you know, the the the conference board things like that are just not standing up and acting or as acting as organizers to get CEOs to rally together and use their strength collectively.

04:56 Speaker A

Well, it seems like in part Gotham it’s because maybe they’re getting some benefits from this as well, right? In the case of Intel, yes, it got that $2 billion infusion from from Softbank, but you know, if it does strike this deal with the government, is it more of an advantage than a disadvantage?

05:35 Gotham

Uh I mean, Intel clearly has had some trouble over the last few years, but I don’t think they’re so desperate for cash that they need this $10 billion from the government when what you’re doing is letting the, you know, essentially letting Howard Letnik and Donald Trump into your into your boardroom and allowing them to dictate the course future course of strategy for your company. They’re making claims about they’re not going they’re going to be non-voting shares, but like nobody believes this, right? Like it’s completely implausible. And so even apart from the national level issues where the the federal government is not capable of administering this, doesn’t have these abilities, none of these things make sense. From an individual level being the like temporarily fostered patron of the Trump administration might be good for a week or two, but I think Lip Buta knows better than anybody, right? That a few weeks ago Trump was calling for him to be fired. Now he’s the favorite child. Next week it could be something else and no company can be run like that.

07:14 Speaker A

Um Bob, what what do you think here? Because you’ve said also that Intel is essential to American security. So there is that that sort of argument to be made that this is in the national interest to to build this strong homegrown chip industry.

07:53 Bob

It absolutely is and I completely agree with what was just being discussed because look, it’s these changes all the time are just untenable for long-term success. And when we think about the critical importance that semiconductors play in the entire economy, not we always talk about it being tech, but remember that semiconductors are in cars, they’re in washing machines, they’re in pretty much everything. And all of those things are driven by technology advancements. And right now, the most advanced technology in the US is made by Intel. And they’ve been making these investments to enable other companies to leverage them because, you know, not only are there geopolitical issues, there’s just the basic practical issue that you’ve got one company, TSMC, that owns essentially almost 100% of the most advanced chip making, you know, manufacturing capacity. That just doesn’t make any sense from a supply chain perspective at all. You need diversity, you need manufacturing in the US because semiconductors are going to be critical moving forward. You can’t just take another company and say, oh well, you can be the next Intel. There have been decades and decades of work done to get to where they are. These things don’t change overnight. So, I think it’s essential that the government does provide some subsidies. Maybe they encourage other US companies to work with Intel. That’s the piece that Intel needs for their foundry business to really move forward to to nail a, you know, Nvidia, an AMD, an Apple, a Qualcomm, these kind of companies to do some work with Intel in their foundry business. That could really turn things around and then start to see more diversification across the supply chain, which is really essential. Again, not just for the US but for the global semiconductor industry.