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I wouldn't go so far as to say "buy Intel stock" because institutional investors have likely already adjusted to the announcement and it's likely priced in. Th

by btown 5y ago

I wouldn't go so far as to say "buy Intel stock" because institutional investors have likely already adjusted to the announcement and it's likely priced in. That said, I think government encouragement is a critical piece of the puzzle and should derisk this operation. The recent supply shocks to the computer industry, when component prices and lead times shot up independent of any geopolitical conflicts (other than COVID), must have been a wake-up call to many that the US's relative lack of foundry capabilities has real strategic implications.

lumost 5y ago
Adding more money to a crappy organization tends to make it crappier. I don't see evidence that money availability is Intel's problem, but it does appear that motivation/near-term thinking is a substantial problem. Oddly, this is a pretty similar pattern to what we've seen with other companies before they divest/outsource manufacturing. Their internal efforts stumble due to lack of drive/funding, followed by a lucrative buyout or sale of their manufacturing operations to an oversees buyer. I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center.
- repsilat 5y ago
  > I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center. This is interesting to me, because I think of it as the stereotypical (if not always accurate) description of American business. The common criticism of American companies is that they outsource productive capacity, go "asset-lean", lever up on their intellectual property, over-financialise etc etc. I've generally thought of the preference for investing in "manufacturing/production" to be a populist sentiment, and out of favour in the boardroom. There are certainly plenty of examples of both types, but in the semiconductor space the trend is clear -- manufacturing has been outsourced from the US, and the old big chip brands mostly stopped making their own chips. And until recently I've been mostly sympathetic to (what I think is) your view, which I've also ascribed to the stereotype of "corporate America" -- that companies should put their capital to its most productive work, and that mostly that means "intellectual property and innovation" or some similar vague notion. Ricardian comparative advantage and all that. One thing that's given me pause has been arguments like this: https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/. Very roughly, that production involves a necessary kind of innovation, and that intellectual property advantages can be less durable than process advantages.
  - Symmetry 5y ago
    If you haven't read "Outsourced Profits" on how and why this process occurred at Boeing and how it ended up causing problems (referenced in the above article) I'd say the document is well worth your time. https://s3.amazonaws.com/s3.documentcloud.org/documents/69746/hart-smith-on-outsourcing.pdf https://s3.amazonaws.com/s3.documentcloud.org/documents/6974...
allie1 5y ago
It's actually not priced in. Price is almost as low as it was before Pat came on as CEO. Subsidies from the US ($50B for the industry) and EU ($20B likely, not confirmed yet) were announced months later. Intel's selling at something like 12x earnings. The fab business is another devision in the company, not an alternative to selling chips. With their yearly cadence, if they deliver, they will take back the share they've lost and then some. Their designs are still superior to AMD, they have just been slower to finish them and roll them out. With improved execution and vertical integration, they should be beating competitors on performance, efficiency and price. If they stick to their new product road map, they should be taking back market share from AMD in full by 2023.

by btown 5y ago

lumost 5y ago

Adding more money to a crappy organization tends to make it crappier. I don't see evidence that money availability is Intel's problem, but it does appear that motivation/near-term thinking is a substantial problem. Oddly, this is a pretty similar pattern to what we've seen with other companies before they divest/outsource manufacturing. Their internal efforts stumble due to lack of drive/funding, followed by a lucrative buyout or sale of their manufacturing operations to an oversees buyer. I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center.

repsilat 5y ago
> I don't understand why executives of American companies don't see the manufacturing/production side of their companies as anything more than a cost center. This is interesting to me, because I think of it as the stereotypical (if not always accurate) description of American business. The common criticism of American companies is that they outsource productive capacity, go "asset-lean", lever up on their intellectual property, over-financialise etc etc. I've generally thought of the preference for investing in "manufacturing/production" to be a populist sentiment, and out of favour in the boardroom. There are certainly plenty of examples of both types, but in the semiconductor space the trend is clear -- manufacturing has been outsourced from the US, and the old big chip brands mostly stopped making their own chips. And until recently I've been mostly sympathetic to (what I think is) your view, which I've also ascribed to the stereotype of "corporate America" -- that companies should put their capital to its most productive work, and that mostly that means "intellectual property and innovation" or some similar vague notion. Ricardian comparative advantage and all that. One thing that's given me pause has been arguments like this: https://berthub.eu/articles/posts/how-tech-loses-out/ https://berthub.eu/articles/posts/how-tech-loses-out/. Very roughly, that production involves a necessary kind of innovation, and that intellectual property advantages can be less durable than process advantages.
- Symmetry 5y ago
  If you haven't read "Outsourced Profits" on how and why this process occurred at Boeing and how it ended up causing problems (referenced in the above article) I'd say the document is well worth your time. https://s3.amazonaws.com/s3.documentcloud.org/documents/69746/hart-smith-on-outsourcing.pdf https://s3.amazonaws.com/s3.documentcloud.org/documents/6974...

allie1 5y ago

It's actually not priced in. Price is almost as low as it was before Pat came on as CEO. Subsidies from the US ($50B for the industry) and EU ($20B likely, not confirmed yet) were announced months later. Intel's selling at something like 12x earnings. The fab business is another devision in the company, not an alternative to selling chips. With their yearly cadence, if they deliver, they will take back the share they've lost and then some. Their designs are still superior to AMD, they have just been slower to finish them and roll them out. With improved execution and vertical integration, they should be beating competitors on performance, efficiency and price. If they stick to their new product road map, they should be taking back market share from AMD in full by 2023.