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Intel didn't get a subsidy because they're poor, the subsidy exists because the US Government wants the company to do something (setup a fab on US soil) that is
by sudhirj 3y ago
Intel didn't get a subsidy because they're poor, the subsidy exists because the US Government wants the company to do something (setup a fab on US soil) that is not necessarily in the shareholders best interest (cheaper to set up a fab elsewhere). The subsidy is the difference in both parties judge to be the cost of doing the expensive thing (that matches US strategic interests) vs the cheaper thing.
- aceon48 3y agoGiven the criticality to National security interests, perhaps the US government should have brought the stick with heavy taxes / penalties for not having the US Based plant instead of the carrot of more corporate subsidies. This is still a US based company, with US leadership
- _giorgio_ 3y agoHere's the crazy one. Punishing a company just because it's american.
- harimau777 3y agoAlternative take: Punishing a company because it's selling out Americans in favor of cheap labor.
- gruez 3y agoYeah I'm sure that's going to cause investors/other companies to think that the US is a good place to set up shop and/or make further investments.
- belorn 3y agoI believe that $77B as a fairly good cause for investors/other companies to set up shop and make investment into the US semiconductors market. According to random market statistic site, it is also currently growing by 10% each year. Is that market so poor that subsidies really is needed on the basis of profitability?
- gruez 3y agoA $77B market that's growing by 10% each year doesn't mean much when the government turns against you demands you do a bunch of expensive investments for nationalist reasons. See also: all the investors fleeing china because they were spooked by the tech crackdown/covid lockdowns. "Punishing a company because it's selling out Americans in favor of cheap labor" is basically the same thing but with a different coat of paint.
- addicted 3y agoThis is a myth. Cheap labor is a benefit but not the primary reason companies are manufacturing in the U.S. today. Look at TSMC. It started setting up US operations years ago and is expecting to complete many years from now. OTOH they started setting up in Japan about a year or so ago and are already cranking out chips.
- api 3y agoI think you meant “aren’t manufacturing” and you are correct. It’s not cheap labor, except for the lowest end manufacturing. It’s that you can’t build anything in America anymore. The government needs to address that instead of subsidizing one off efforts.
- fancyfredbot 3y agoThe Japanese plant is less ambitious, using an older process on a smaller scale. The fact the Japanese plant was finished first says little about manufacturing in the US vs Japan.
- roody15 3y agohttps://www.bnnbloomberg.ca/tsmc-s-second-fab-in-arizona-delayed-as-us-grants-remain-in-flux-1.2023491 https://www.bnnbloomberg.ca/tsmc-s-second-fab-in-arizona-del... TSMC is looking to bail completely on the second fab / even intel is now looking at delaying. The problem we are running into is a lot of DEI language was included in the chips act which is making it hard for TSMC (and Intel) to comply. This is not a good PR move to say this outright so they will just give more generic "labor" shortages etc as the official reason.
- helsinkiandrew 3y ago> it's selling out Americans in favor of cheap labor. Perhaps American workers. But an alternate take is that American consumers got cheaper chips and PCs - which resulted in more being sold, more companies and people using them, greater efficiency and new ideas and perhaps a more productive economy. It will be interesting in 5-10 years if the US needs to tax/block possibly cheaper and better components built outside the US being sold
- 34679 3y agoIntel, like any other succesful company, prices its goods based on what the market will pay, not what it costs to make. Lower costs does not mean lower prices for customers, it means more profits for Intel.
- amarcheschi 3y agoFurthermore, up until at least a few years ago (i don't know how it is now) intel chips were more expensive than amd's, especially on server side, even accounting on performance/watt and intel adopted practices such as locking mobo to just one chipset and things like that. the situation might be different now tho
- helsinkiandrew 3y ago> Intel, like any other succesful company, prices its goods based on what the market will pay, not what it costs to make That may be true for Intel's CPUs but when products aren't produced by monopolies, those that have the cheapest costs and are in competition with others, often lower their prices to compete where the competitor can't. For example: AMD, graphics and motherboard parts
- prerok 3y agoWell, I take it that it's always true and is a good lesson for anyone trying to set the price for their own product (like a hacked together side project one of us might be working on :) ). My understanding is that the price should never be set based on production cost but on the value it brings to the customer. Thereby, a simple program you or I could hack together in a month, might have a cost of 10k in labor only cost, but if it would save the customer millions each year, they would pay a million for it. So, you set the cost based on how much they are willing to pay, based on how much they would profit/save. If another competitor offers a similar solution, you just undercut them by 10%, or invest another 10k for superior features.
- owisd 3y agoIntel is a product of Shockley, which was a product of Bell Labs, which was a product of “punishing” AT&T for “being American”. AT&T would have zealously guarded the transistor patent and never have licenced it out to Motorola, TI, etc. if they only cared about maximising shareholder value.
- deleted 3y ago[deleted]
- willcipriano 3y agoYour brother's idiot son doesn't get a no show job if you use the stick.
- DonnyV 3y agoWe're always bending over backwards for a handful of companies instead of promoting a healthy market. We should of created a race with multiple companies to build the best chip factories.
- gruez 3y ago> We should of created a race with multiple companies to build the best chip factories. That's insanely expensive. Today the only companies that make leading edge chips are TSMC, Samsung, and Intel. Global Foundries (headquartered in US) dropped out a few years ago because it was too expensive. How on earth are you going to fund "a race with multiple companies to build the best chip factories"? It's going to cost multiples of whatever the intel subsidy is.
- sgarland 3y agoMultiples of $8 billion? Oh no, where would we find the money? If this is truly a national security issue, perhaps some of the DoD’s ~$150 billion R&D budget could go towards it.
- prerok 3y agoTo be fair: to build whole companies would not cost multiples of 8B but multiples of 150B. And if you really wanted to cover all "critical" industries, even this would be a drop (or maybe a puddle) in the ocean.
- specialist 3y agoAccelerated consolidation was policy for decades. Clinton Admin's dept of defence pushed it really hard, esp for defense contractors. To reduce costs, make our nat'l champions more competitive internationally, make our hair more luxuriant, and cure rickets. Because reasons. Now the pendullum might finally be swinging back towards pro-competition and healthy open markets.
- prerok 3y agonit: should of -> should have
- sschueller 3y agoThe US Government could pass a new ruling requiring all chips in all military hardware (or even all hardware used by any government agency) down to the smallest IoT shit needs to be made in the US by a US firm. I doubt Intel would need any money or other incentive if the orders start coming in.
- YetAnotherNick 3y agoGood way to force Intel/all remaining chipmakers to move its headquarters to other country.
- rob74 3y ago...and then stop buying military hardware for 5+ years, until these US-made chips are available?
- willcipriano 3y agoPurchase orders like this happen years out. Before the deliveries dry up, Intel's cash flow will dip and investors will riot until Intel is ready to do business in the US.
- wakawaka28 3y agoThe military may not be a large enough customer to make such demands. Or perhaps a handful of companies would do it at 100x the cost of similar civilian products. It would turn into another $10k toilet seat fiasco.
- andsoitis 3y agoIt is highly likely that that was considered but discounted for being suboptimal.
- lumb63 3y agoThe supply chain for military hardware is already under heavy scrutiny. I don’t think the CHIPS Act is about security; it’s about onshoring production so the US can avoid caring about Taiwan.
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- skywal_l 3y agoWouldn't be easier for the US government to buy Intel shares rather than subsidies it? It should actually be mandatory for the government to own part of a company that is so critical to national and security interest.
- taneq 3y agoIdeally this kind of subsidy would be paid any time the expected return on investment for the government was better than breaking even. It’s not about making sure only the most deserving get help, it’s about making sure everyone (including the most deserving) gets more.
- nabla9 3y agoIt's a strategic investment for national security with net negative value. The government does not want return of investment. The government wants to lose money so that national security gets better.
- User23 3y agoInvesting money is different when you can create it from nothing. Needless to say the intuitions one develops from investing while not being able to create money at will are not entirely applicable.
- kiba 3y agoMaybe or maybe not in term of net tax revenue, but it's certainly an investment with an expectation of the preferred outcome of national security, with some portion of the subsidy maybe being returned as taxes of various kinds.
- taneq 3y agoI think we're using different definitions. A "strategic investment for national security" only has "net negative value" is the overall expected outcome is negative. War is pretty expensive so it's worth spending a bit of money to avoid it, or at least sway the outcome. The government doesn't want a dollar ROI in the sense of increased revenues because it defines the dollar. What happens to the local currency is just one factor in the overall considerations.
- pwillia7 3y agoYeah I was going to say this is the vig for not going with China for money because greed is the only virtue in the gilded age II
- op00to 3y agoPerhaps the government should simply nationalize Intel if they continue to do stock buybacks. There’s more knobs to turn than the free money faucet.
- pjc50 3y agoI'm sure the US taxpayer would be very happy to take one hundred and eighty five billion dollars and give it to the investors instead.
- _ea1k 3y agoImagine Intel running at the full speed and efficiency of the US government.
- ChadNauseam 3y agoAre you suggesting the government buy Intel, or that they steal it from its current owners? You might have different opinions than I do about the morality of such a thing, but either way it would be disastrous as it would disincentivize all investment in things the US can steal.
- transcriptase 3y agoThis thread really brought an alarming number of tankies out of the HN woodwork. Not something you typically see on here!
- pjc50 3y ago[flagged]
- Arthur_ODC 3y ago[flagged]
- troyvit 3y agoDang and I just learned the word too.
- fragmede 3y agoBut were there strings attached that make Intel actually do that with this money, unlike last time?
- sudhirj 3y agoNot sure why what would matter. One party (US taxpayers) is paying another party (Intel shareholders) to do something specific. What recipients do with the money is their own problem. EDIT: Sorry, read this as strings attached to what Intel could do with the money. I would assume the subsidy is contingent on Intel actually setting up the fab and some output numbers, seems idiotic to do it any other way. Don't think this was a bailout or handout at all. I haven't seen the agreement though.
- buran77 3y agoPeople generally see subsidies given to companies as a contract. Subsidies in general aren't a contract. People don't have to "do their part" when they benefit from a subsidy (like vote for a specific party because they subsidized the price of gas), and usually neither do companies.
- javagram 3y ago> People don't have to "do their part" when they benefit from a subsidy (like vote for a specific party because they subsidized the price of gas), and usually neither do companies. This is typically false, usually the subsidies are in the form of tax credits that are only awarded once you perform the desired action, or at least have to be paid back if you fail to do so. They don’t just cut a check and wash their hands. This is true for individuals as well as corporations. When you do your taxes this year, take a look at credits like the renewable energy credit. You have to actually purchase insulation or solar panels to be eligible for the credit.
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- mhb 3y agoIf it's such an important objective for the US government, perhaps they shouldn't muddle it up with DEI bullshit: https://thehill.com/opinion/4517470-dei-killed-the-chips-act/ https://thehill.com/opinion/4517470-dei-killed-the-chips-act...
- fennecbutt 3y agoBut the US government can force them to do this without paying them lmao. The same way that they can restrict the export of certain technologies to certain countries. This is really just the typical international racket of the rich getting richer.