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I’ll be honest: there is a very good chance this won’t work .... At the same time, the China concerns are real, Intel Foundry needs a guarantee of existence to

by themgt 1y ago

I’ll be honest: there is a very good chance this won’t work .... At the same time, the China concerns are real, Intel Foundry needs a guarantee of existence to even court customers, and there really is no coming back from an exit. There won’t be a startup to fill Intel’s place. The U.S. will be completely dependent on foreign companies for the most important products on earth, and while everything may seem fine for the next five, ten, or even fifteen years, the seeds of that failure will eventually sprout, just like those 2007 seeds sprouted for Intel over the last couple of years. The only difference is that the repercussions of this failure will be catastrophic not for the U.S.’s leading semiconductor company, but for the U.S. itself. Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.

Neywiny 1y ago
This and everything else. We outsourced manufacturing of almost everything then are surprised when the people doing it for decades are better than we were.
- marbro 1y ago
  We outsourced manufacturing because it's not very profitable. The Mag 7 make 50x as much money as TSMC. Apple and Microsoft are the most profitable businesses in history.
  - georgeecollins 1y ago
    Intel was very profitable until it was not. They spent over $800B on stock buybacks. That will buy you some fabs, some R&D. Its true they invested in R&D but not well. Maybe the answer was to fund an independent internal competitor to keep the org focused. Financialization is a dead end when you face a nation state determined to control steps in you value chain. How profitable will apple be if they can’t get chips?
    - jandrese 1y ago
      I still think Intel missed the boat when they had the dominant process in focusing entirely on their own chips and not taking customers for third party fabbing. Samsung and especially TSMC have demonstrated conclusively that the real money is in producing chips for other companies. It might be lower margin, but the volume is undeniable and it keeps your company on its toes with node improvements. Intel switched to a "service the stockholders before the customers" mode and they have never recovered.
      - freeopinion 1y ago
        TSMC does not compete with their customers. Intel would. I know that is not a new idea and there are some established mitigations. But it seems it would be better if it wasn't an issue at all.
        vel0city 1y ago
        Samsung competes with their customers and yet they still sometimes choose Samsung. Same with IBM when they were a big competitive chip manufacturer. It probably makes the sale harder but it has been a common arrangement in the past.
        convolvatron 1y ago
        I worked in a CPU group that used IBM for a fab when they still had one. it was definitely an issue.
  - jandrese 1y ago
    The problem is when importance is not reflected in the quarterly profit margin.
    - Workaccount2 1y ago
      The true place where the government should steer the ship of the market.
    - treis 1y ago
      Chips are one of those things where being the best is simultaneously very important and not at all important. Making a 10% better chip gets you the entire market. But it makes practically no difference if your cellphone or laptop or server or whatever has a 10% worse chip.
      - p1necone 1y ago
        > Making a 10% better chip gets you the entire market Gets you the entire datacenter market maybe. End user (PCs, cellphones etc) stuff is much more concerned about perf/$ (up front cost) than perf/watt (long term cost), and the embedded market (electronics, appliances etc) mostly care about 'good enough' as cheaply as possible - performance isn't a concern at all for many use cases. And the corporate market mostly cares about (perceived) reliability/liability concerns over everything else - see how hard it's been for AMD cpus to penetrate despite being measurably better in every category compared to Intel at various points in time.
  - ilikerashers 1y ago
    The EU outsourced manufacturing without any Mag 7. I'm sure it'll work out well for us...
    - kazen44 1y ago
      mind you that a lot of this outsourcing is also happening inside the EU from high wage western countries to lower waged eastern countries (poland, hungary, romania etc).
  - davedx 1y ago
    No, we outsourced it for the same reason we outsource anything else: because someone else, somewhere else, is doing it for cheaper. It has nothing to do with the profitability of the manufacturing company and everything to do with the costs of the products and services to their customers
zoeysmithe 1y ago
There's a real folly in capitalist countries thinking they can be self-sufficient walled castles. Capitalism by its nature will seek out the lowest cost be it in labor or manufacturing. That means often means outsourcing. Our system has no breaks for this. In fact it works actively for this, hence the neolib ideal of "just move towards efficiencies, and let the chips fall where they may." This is ideal under capitalism. As long as we avoid the needed migration to socialism, this is the best we can do. Neolib economies generally work as much as anything "works" under capitalism. The GDP of the USA, median salary, quality of life, etc was the envy of the world until the recent nationalist movement that's based on "insourcing" and tariffs. You can't go back and capitalism migrates to efficiencies, which means outsourcing. Its more efficient to export factories and keep cushy office/service jobs here and drain the profits from those factories overseas. Nationalism/protectionism and capitalism are fundamentally incompatible, so here we are. Demagogy and populism and "return to the past" mentalities used to win political power are the actual problem here. Also what exactly happens if intel goes under? We have to buy 'foreign' licensed ARM? Manufacture in Asia? We're already doing that. And we have AMD which is a good, if not, superior product, regardless of manufacturing locale. We don't need local fabs the same way we don't need local factories for a lot of other things. You can't just depress wages with a wave of a hand nor do tariffs work outside of some really focused edge cases. >The U.S. will be completely dependent on foreign companies This is true of nearly all things in nearly all countries. Recent nationalist movements won't change how capitalism works and recent tariffs and protectionism has only hurt these industries and the working class. The toothpaste is out of the tube and it cannot be put back in. What we're seeing with the government buying intel is an attempt to do that, and it will fail. Expect more tomfoolery like this until we get responsible leadership, but until then we all have to sit here and watch these various economic horrors unfold. Be it this, inflation, mindless tariffs, etc. This will fail and its obvious it will, but currently it buys political power, so we will go this route because voters, largely uninformed on how capitalism works, think this is the "one weird trick" that will make them wealthy. It won't. In fact, all recent indicators are more negative as these policies continue. It will instead make them poor.
- micromacrofoot 1y ago
  That's the premise of neoliberalism, you need globalism or the entire idea of capitalism falls apart and every domestic company becomes a crab in a bucket... trying to recapture that lost value with nationalism won't work within the span of political term limits, they're trying to undo something that's been happening for 50 years... we literally don't even have the underlying infrastructure for re-shoring, basics like getting electricity where it needs to go become a problem
georgeburdell 1y ago
If I may add my view as a formerly high-achieving semiconductor worker that Intel would benefit greatly from having right now, a lot of us pivoted to software and machine learning to earn more money. My first 2 years as a software engineer earned me more RSUs than a decade in semiconductors. Semiconductors is not prestigious work in the U.S., despite the strategic importance. By contrast, it is highly respected and relatively well remunerated in the countries doing well in it. From this lens, the silver lining of the software layoffs going on may be to stem the bleeding of semiconductor workers to the field. If Intel were really smart, they’d be hiring more right now the people they couldn’t get or retain 3-5 years ago
- packetlost 1y ago
  If Intel were well managed they would purge like 2/3rs of the managers and anyone in the bottom 50th percentile and then pay whatever it takes to get people skilled in their core industry back, training the remaining people as necessary to fill in gaps for the future. They literally cannot have a culture that encourages the now-traditional job hopping that is so pervasive in American business culture. They can't afford it.
  - freeopinion 1y ago
    Who gets to determine the bottom 50th percentile?
    - packetlost 1y ago
      it doesn't really matter as long as you retain the top 10% who do 90% of the work.
      - willhslade 1y ago
        I think you glossed over the question
        packetlost 1y ago
wat10000 1y ago
Intel was the best until fairly recently. Then they still looked like the best to a non-expert observer, and then still looked at least competitive until even more recently. The modern world changes too fast for our governments to adapt to. Especially when we're talking about state of the art semiconductors and our leader was born before the invention of the transistor.
- scarface_74 1y ago
  Intel hasn’t been “the best” since the world cared more about mobile in 2010. There GPUs have always been also ran. It just wasn’t a big deal until crypto and later machine learning. Even for integrated graphics, Intel has been behind Apple’s/TSMC ARM based processor before the Mx based Macs.
  - dboreham 1y ago
    For me it's debatable that they were "behind" on GPU because I didn't need a bleeding edge gaming GPU. I only needed a GPU fast enough for spreadsheets and code editors, provided at a competitive price and power budget. Intel actually did deliver that.
    - rjsw 1y ago
      Intel also had adequate software for their GPUs. They didn't mess about using binary blobs for them.
      - JustExAWS 1y ago
        To a first approximation, no one cares about open source drivers when most PCs are running Windows and servers running Linux don’t care about Intels GPUs
    - SlowTao 1y ago
      I have said that their benchmark to power a desktop with Google Maps in 3D. Anything beyond that was a bonus.
mvc 1y ago
If all advanced countries follow this reasoning, where does that leave us?
- minkzilla 1y ago
  Robust and redundant manufacturing spread across the world with more opportunity for innovation?
  - mallets 1y ago
    Trillions of dollars spent just for redundancy? Most wouldn't even succeed in building a working process, forget profitable.
    - throwawaymaths 1y ago
      Starfleet code requires a second backup? In case the first backup fails. What are the chances that both a primary system and its backup would fail at the same time?
      - twoodfin 1y ago
        This is too glib: If you imagine a world where every critical industry is replicated in every large nation, often inefficiently or inadequately, that’s a world where the average person is much, much poorer. And for what?
        minkzilla 1y ago
        Maybe instead of all the wealth flowing to a couple huge companies in a couple countries wealth would be distributed more broadly.
        j4coh 1y ago
        Security, perhaps.
JKCalhoun 1y ago
Perhaps then fabs should be considered important enough for the US then that a new entity, perhaps not unlike NASA, is created to create and run these.
- readthenotes1 1y ago
  NASA seems to outsource a lot. Would you like Boeing to create the fab next door to you? What could go wrong??
  - rjsw 1y ago
    You would still outsource running the fab to Intel, just have a government body overseeing it.
    - chatmasta 1y ago
      This won’t solve the biggest challenge/problem, which is lack of talent for staffing the fab. In Arizona they had to import a bunch of temp workers from Taiwan just to train the locals. We don’t have the skills. If you want to involve the government, maybe we should be training units of the military to make their own chips.
      - jurking_hoff 1y ago
        [dead]
      - ecshafer 1y ago
        How many workers do we need? TSMC has 80k workers all in. 15-24 there is about 3 million US NEETs. I think that we could have a 10 year plan to get 80k people with EE/CE/NanoTech Eng/ChemEng/etc degrees. Make college free, or hell even a stipend for people to pursue "Critical Careers", heavily fund Phds in the same areas for US Citizens, and we will see workers with the skills.
        nemothekid 1y ago
dfxm12 1y ago
It's such a stunning dereliction the US let things get to this point. It's a side effect of systemically putting short term gains ahead of long term research. CHIPs act may be too little, it is certainly too late...
- davedx 1y ago
  > systemically putting short term gains ahead of long term research That's more the stock market than the US government though. You could argue the US government tries to play a long game, and often the way the US plays that game is to let the free market decide (hands off, small government). It's definitely a valid strategy and has worked extremely well in a number of other industries, but for this specific niche, less so, and even then you could argue it's down to Intel's mismanagement than anything the government could or should have done.
  - dfxm12 1y ago
    It is clear that the government and wall street are generally of one mind on this. One recent specific way the government contributed to this is via the Tax Cuts and Jobs Act (TCJA) of 2017, which increased tax burden of R&D. They've also cut a lot of their own research funding (NIH, NSF). I can't make the argument that the government is "hands off, small government" because I simply don't see the evidence of that. To the contrary, I have seen things like TARP, stimulus checks, oh, and the government buying 10% of Intel.
    - hobs 1y ago
      The only people arguing against big government are republicans when democrats are in power, otherwise everyone is happy to expand spending.
    - macintux 1y ago
      Now that we have lawmakers openly declaring they would pick capitalism over democracy if forced to choose, I have little hope that the government will be receptive to changing anything structural.
nonethewiser 1y ago
Is it just me or is the author only making an argument for why Intel is too big to fail? He says hes steelmanning the equity stake but then he doesn't argue why it's necessary. He devotes 2 sentences to CLAIMING its necessary after aruging that Intel is too big to fail. The article is basically like this: > Leading edge domestic foundry companies are a national security concern. Therefor Intel is too big to fail. OK. Many can agree with this. And I think the author makes a very good argument for it. He makes some good points: - Startup cant replace Intel - US cant rely on TSMC alone - Artificial demand could actually improve Intel by solving the chicken and egg problem But that doesn't answer the question, "why the equity stake?" And for more context, it's replacing what would have been grants with the equity stake. So it's, "Why replace the $XB in grants with an equity stake?" He does touch on it but it's just a claim thrown in at the end: >The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere. There simply isn’t a credible way to make that promise without having skin in the game, and that is now the case. OK, maybe. But that now needs to be argued for. The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms.
- davedx 1y ago
  Yeah he could have explained that more, maybe he's assuming familiarity with other public-private ventures around the world? If I was explaining it I would say "a huge equity stake gives you a lot of votes and influence over the company's strategic direction", including what the returns to shareholders should look like. Think of railways in countries where the government has say, a 50% stake.
  - cthalupa 1y ago
    Except what the government purchased is a block of non-voting shares as long as the government holds them. So what benefit does that provide over grants?
- yyyk 1y ago
  >The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms. It's not the same as taking part in decisionmaking? Intel could just say 'no' to grants. They don't have to accept the terms.
theMMaI 1y ago
Maybe the problem for Intel is complacency exactly because there is this expectation of a bailout when things don't go to plan. While other hardware companies got lean operationally and employee wise Intel did not. The ex-Intel employees all paint somewhat the same picture of bureaucracy, layers of (poorly managed) dependencies and reliance on paradigms that worked during late 90s / early 2000s. If you followed sources like semiaccurate the situation at Intel is not surprising either, they've been reporting on issues there since their inception.
roughly 1y ago
> Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over. What's annoying about this is that it's the same people who drove the outsourcing and decline of American industry who are using the same framework they've been using to drive that stunning dereliction to argue that this is the wrong approach.
craftkiller 1y ago
> over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? Over a decade ago Intel wasn't driving itself into the dirt. Their failure was just beginning approximately 1 decade ago, starting with their failure at EUV leaving them trapped on 14nm.
- doytch 1y ago
  Huh? He talked about and linked to a series of his older articles, including this one from 2013. [1] It's been a while. [1]: https://stratechery.com/2013/the-intel-opportunity/ https://stratechery.com/2013/the-intel-opportunity/
  - craftkiller 1y ago
    That article is from before Intel started to decline. Quoting the end of that article: > Intel is already the best microprocessor manufacturing company in the world Intel was not driving themselves into the dirt if they are the best in their field. Instead, I'd suggest looking at when the process nodes were achieved: | | Someone Else | Intel | Lead | |------+----------------+-------+------| | 32nm | 2011 (Samsung) | 2009 | 2 | | 22nm | 2013 (IBM) | 2011 | 2 | | 14nm | 2015 (Samsung) | 2014 | 1 | | 10nm | 2017 (Samsung) | 2018 | -1 | | 7nm | 2018 (TSMC) | 2021 | -3 | Seems almost exactly a decade ago that Intel lost their lead and fell behind the competition.
hrq 1y ago
I believe something similar is happening in drug development right now. It may take less than 5, 10, 15 years to see the impact to the US. But from someone who has a vantage point to see it across many parts of the industry, including having seen the evolution of Intel / TSMC, I think it is a very similar story. Right now is like 2007 (or maybe even a bit later) for therapeutics. In the future, we will look back on this year as the year we gave it up.
- CincinnatiMan 1y ago
  It could be argued that new drug development is less needed during wartime than processor manufacturing.
  - hrq 1y ago
    New drugs have changed the course of some wars!
- esafak 1y ago
  What's happening exactly?
  - vel0city 1y ago
    Billions in grants have already been cancelled. Lots of research is losing its funding.
    - hrq 1y ago
      Agreed. Also the biotech industry is largely getting defunded. Venture funds are pointing dollars elsewhere so fewer new companies are being started, while more biotechs are being started in China. Most new drugs come from biotechs nowadays (not all of them, not GLP-1’s). But many do. If that innovation is happening in China and not the US today then it will create an issue in several years. We will not control our supply chain for a critical set of goods.
      - 1y ago
AceJohnny2 1y ago
This is the same reason France keeps propping up STMicroelectronics and their fab in Crolles, France (near Grenoble). There is strategic importance in maintaining home-grown capability. (it's also the same reason France keeps propping up many other industries, and sells weapons/jet fighters to other countries...)
ksec 1y ago
>It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over. There were a few of us warning about this well before it all happened in 2013 and 2014. Predicted the death of Intel, and surge of AMD and TSMC before majority of people even heard of TSMC. I also feel a little sad about TSMC, now that they have invested a lot in US but US is actively and strategically trying to pop up Intel to compete. But TSMC is at least 2 cycle ahead, meaning 5 - 6 years time. Unless TSMC make any mistakes even in the best case scenario I dont see Intel catching up within that time frame. Especially now they have little to no cash cow. Server, GPU, Consumer CPU are all under threats.
giantg2 1y ago
People have been raising this alarm for decades as more of our domestic manufacturing is off shored. Few listened then. It's unlikely we will come back from this.
reenorap 1y ago
The reason this pivot happened was because of the Pandemic. As soon as the Pandemic hit and China stopped sending us PPE it was a violent slap in the face and an extremely rude awakening that we are completely dependent on China and other countries for basic necessities. India also stopped sending us pharmaceuticals. This realization means that no matter what, Americans need to make certain basic necessities, and chips are one of them. I have friends at Intel that have been there for 20 years and they basically say it's dead man walking. They have chip equipment that they paid billions for that is sitting idle because they don't have the demand, but they can't turn them off otherwise it will be destroyed. However, these machines cost hundreds of millions to keep on. Plus they are already out of date compared to TSMC. The entire thing is a disaster, but Americans need an American source of chips so they have no choice but to double and triple down on a bad investment and hope that something happens that will let them become competitive again.
safety1st 1y ago
Well, there's a really easy and straightforward explanation for how this happened. It's just uncomfortable for everyone who's succeeded because of it. So they don't say it. America abandoned free enterprise in favor of managed monopolies. It happened via a wave of financialization, globalization, government bailouts, mergers and consolidation that all granted immediate financial benefits to shareholders, at the cost of long term competitiveness. That's it that's the whole story in a nutshell, look at Boeing, Intel and others, you'll see it again and again. This is not the right way and US economics are looking more like Mussolini's every day. Force these incumbents to compete. With fragments of each other, or with new American companies. Perhaps shelter them from some foreign competition if you really must. That would once again unlock the unparalleled power of the 350 million enterprising souls spread between the two coasts. Which is what got America to #1 in the first place. Give those souls something to do again that isn't meth or opiates. Managed monopolies are not the way.
- lmm 1y ago
  That's backwards. US companies moved manufacturing out of the US because other countries had competitive advantages (often cheaper labour), not because they weren't free enterprises but they were. Making stuff in the US doesn't make business sense. Patriotism doesn't make business sense. If you tell companies their business is to compete with each other to be the most profitable, that's what they'll do, and that's what they did.
  - safety1st 1y ago
    It's not backwards. It's ECON101. Government makes policy. Government decides when and where to apply tariffs. If government applies a tariff on imports from any country that has cheap labor, businesses will stop offshoring to that country because it will no longer be cheaper. Or at least, that's what businesses do in a free market economy. In the free market where many firms compete for your dollar, they can and will compete on price when they have to. But in a "managed monopolies" economy like 2025 America, they may just raise prices instead because they have at most 2-3 competitors, and all it takes is a few games of golf, a wink and a nod to keep prices high. We used to call that a cartel, prosecute the shit out of those companies, and defend the free market. America's government stopped doing that. Now our enforcement is Luigi. When and where will the next Luigi strike? How many Luigis do you want to see? I would rather have government resume serving the People, it will work better, like it did with Standard Oil and AT&T. Patriotism is not required. Policy that puts the people first plus competent law enforcement against corporate crime is all that we need.
trhway 1y ago
>There won’t be a startup to fill Intel’s place. That’s Intel management’s FUD building a moat against such startups with the government’s help. Several billions of dollars is not a scary level of funding these days for such startups to happen. Plus CHIPS pile of hundreds of billions. Plus Nvidia, Google, Amazon, Apple and others can always form a consortium to build a foundry. A lot of options, yet all of them are being killed by the Intel management skillfully working the bronze ear. That is how a tech race is lost - by letting government instead of the market to pick winner.
speleding 1y ago
I would like to challenge the notion that you absolutely need state of the art fabs to win a war. Most military gear uses "proven technology" several generations behind SOTA. When push really comes to shove there is a lot you can do with the chips you already have and nationalizing the fabs under your control. The dependence on oil from the Middle East is comparatively a bigger problem for the West (though not for the US with its shale oil reserves).

by themgt 1y ago

Neywiny 1y ago

This and everything else. We outsourced manufacturing of almost everything then are surprised when the people doing it for decades are better than we were.

marbro 1y ago
We outsourced manufacturing because it's not very profitable. The Mag 7 make 50x as much money as TSMC. Apple and Microsoft are the most profitable businesses in history.
- georgeecollins 1y ago
  Intel was very profitable until it was not. They spent over $800B on stock buybacks. That will buy you some fabs, some R&D. Its true they invested in R&D but not well. Maybe the answer was to fund an independent internal competitor to keep the org focused. Financialization is a dead end when you face a nation state determined to control steps in you value chain. How profitable will apple be if they can’t get chips?
  - jandrese 1y ago
    I still think Intel missed the boat when they had the dominant process in focusing entirely on their own chips and not taking customers for third party fabbing. Samsung and especially TSMC have demonstrated conclusively that the real money is in producing chips for other companies. It might be lower margin, but the volume is undeniable and it keeps your company on its toes with node improvements. Intel switched to a "service the stockholders before the customers" mode and they have never recovered.
    - freeopinion 1y ago
      TSMC does not compete with their customers. Intel would. I know that is not a new idea and there are some established mitigations. But it seems it would be better if it wasn't an issue at all.
      - vel0city 1y ago
        Samsung competes with their customers and yet they still sometimes choose Samsung. Same with IBM when they were a big competitive chip manufacturer. It probably makes the sale harder but it has been a common arrangement in the past.
      - convolvatron 1y ago
        I worked in a CPU group that used IBM for a fab when they still had one. it was definitely an issue.
- jandrese 1y ago
  The problem is when importance is not reflected in the quarterly profit margin.
  - Workaccount2 1y ago
    The true place where the government should steer the ship of the market.
  - treis 1y ago
    Chips are one of those things where being the best is simultaneously very important and not at all important. Making a 10% better chip gets you the entire market. But it makes practically no difference if your cellphone or laptop or server or whatever has a 10% worse chip.
    - p1necone 1y ago
      > Making a 10% better chip gets you the entire market Gets you the entire datacenter market maybe. End user (PCs, cellphones etc) stuff is much more concerned about perf/$ (up front cost) than perf/watt (long term cost), and the embedded market (electronics, appliances etc) mostly care about 'good enough' as cheaply as possible - performance isn't a concern at all for many use cases. And the corporate market mostly cares about (perceived) reliability/liability concerns over everything else - see how hard it's been for AMD cpus to penetrate despite being measurably better in every category compared to Intel at various points in time.
- ilikerashers 1y ago
  The EU outsourced manufacturing without any Mag 7. I'm sure it'll work out well for us...
  - kazen44 1y ago
    mind you that a lot of this outsourcing is also happening inside the EU from high wage western countries to lower waged eastern countries (poland, hungary, romania etc).
- davedx 1y ago
  No, we outsourced it for the same reason we outsource anything else: because someone else, somewhere else, is doing it for cheaper. It has nothing to do with the profitability of the manufacturing company and everything to do with the costs of the products and services to their customers

zoeysmithe 1y ago

There's a real folly in capitalist countries thinking they can be self-sufficient walled castles. Capitalism by its nature will seek out the lowest cost be it in labor or manufacturing. That means often means outsourcing. Our system has no breaks for this. In fact it works actively for this, hence the neolib ideal of "just move towards efficiencies, and let the chips fall where they may." This is ideal under capitalism. As long as we avoid the needed migration to socialism, this is the best we can do. Neolib economies generally work as much as anything "works" under capitalism. The GDP of the USA, median salary, quality of life, etc was the envy of the world until the recent nationalist movement that's based on "insourcing" and tariffs. You can't go back and capitalism migrates to efficiencies, which means outsourcing. Its more efficient to export factories and keep cushy office/service jobs here and drain the profits from those factories overseas. Nationalism/protectionism and capitalism are fundamentally incompatible, so here we are. Demagogy and populism and "return to the past" mentalities used to win political power are the actual problem here. Also what exactly happens if intel goes under? We have to buy 'foreign' licensed ARM? Manufacture in Asia? We're already doing that. And we have AMD which is a good, if not, superior product, regardless of manufacturing locale. We don't need local fabs the same way we don't need local factories for a lot of other things. You can't just depress wages with a wave of a hand nor do tariffs work outside of some really focused edge cases. >The U.S. will be completely dependent on foreign companies This is true of nearly all things in nearly all countries. Recent nationalist movements won't change how capitalism works and recent tariffs and protectionism has only hurt these industries and the working class. The toothpaste is out of the tube and it cannot be put back in. What we're seeing with the government buying intel is an attempt to do that, and it will fail. Expect more tomfoolery like this until we get responsible leadership, but until then we all have to sit here and watch these various economic horrors unfold. Be it this, inflation, mindless tariffs, etc. This will fail and its obvious it will, but currently it buys political power, so we will go this route because voters, largely uninformed on how capitalism works, think this is the "one weird trick" that will make them wealthy. It won't. In fact, all recent indicators are more negative as these policies continue. It will instead make them poor.

micromacrofoot 1y ago
That's the premise of neoliberalism, you need globalism or the entire idea of capitalism falls apart and every domestic company becomes a crab in a bucket... trying to recapture that lost value with nationalism won't work within the span of political term limits, they're trying to undo something that's been happening for 50 years... we literally don't even have the underlying infrastructure for re-shoring, basics like getting electricity where it needs to go become a problem

georgeburdell 1y ago

If I may add my view as a formerly high-achieving semiconductor worker that Intel would benefit greatly from having right now, a lot of us pivoted to software and machine learning to earn more money. My first 2 years as a software engineer earned me more RSUs than a decade in semiconductors. Semiconductors is not prestigious work in the U.S., despite the strategic importance. By contrast, it is highly respected and relatively well remunerated in the countries doing well in it. From this lens, the silver lining of the software layoffs going on may be to stem the bleeding of semiconductor workers to the field. If Intel were really smart, they’d be hiring more right now the people they couldn’t get or retain 3-5 years ago

packetlost 1y ago
If Intel were well managed they would purge like 2/3rs of the managers and anyone in the bottom 50th percentile and then pay whatever it takes to get people skilled in their core industry back, training the remaining people as necessary to fill in gaps for the future. They literally cannot have a culture that encourages the now-traditional job hopping that is so pervasive in American business culture. They can't afford it.
- freeopinion 1y ago
  Who gets to determine the bottom 50th percentile?
  - packetlost 1y ago
    it doesn't really matter as long as you retain the top 10% who do 90% of the work.
    - willhslade 1y ago
      I think you glossed over the question
      - packetlost 1y ago

wat10000 1y ago

Intel was the best until fairly recently. Then they still looked like the best to a non-expert observer, and then still looked at least competitive until even more recently. The modern world changes too fast for our governments to adapt to. Especially when we're talking about state of the art semiconductors and our leader was born before the invention of the transistor.

scarface_74 1y ago
Intel hasn’t been “the best” since the world cared more about mobile in 2010. There GPUs have always been also ran. It just wasn’t a big deal until crypto and later machine learning. Even for integrated graphics, Intel has been behind Apple’s/TSMC ARM based processor before the Mx based Macs.
- dboreham 1y ago
  For me it's debatable that they were "behind" on GPU because I didn't need a bleeding edge gaming GPU. I only needed a GPU fast enough for spreadsheets and code editors, provided at a competitive price and power budget. Intel actually did deliver that.
  - rjsw 1y ago
    Intel also had adequate software for their GPUs. They didn't mess about using binary blobs for them.
    - JustExAWS 1y ago
      To a first approximation, no one cares about open source drivers when most PCs are running Windows and servers running Linux don’t care about Intels GPUs
  - SlowTao 1y ago
    I have said that their benchmark to power a desktop with Google Maps in 3D. Anything beyond that was a bonus.

mvc 1y ago

If all advanced countries follow this reasoning, where does that leave us?

minkzilla 1y ago
Robust and redundant manufacturing spread across the world with more opportunity for innovation?
- mallets 1y ago
  Trillions of dollars spent just for redundancy? Most wouldn't even succeed in building a working process, forget profitable.
  - throwawaymaths 1y ago
    Starfleet code requires a second backup? In case the first backup fails. What are the chances that both a primary system and its backup would fail at the same time?
    - twoodfin 1y ago
      This is too glib: If you imagine a world where every critical industry is replicated in every large nation, often inefficiently or inadequately, that’s a world where the average person is much, much poorer. And for what?
      - minkzilla 1y ago
        Maybe instead of all the wealth flowing to a couple huge companies in a couple countries wealth would be distributed more broadly.
      - j4coh 1y ago
        Security, perhaps.

JKCalhoun 1y ago

Perhaps then fabs should be considered important enough for the US then that a new entity, perhaps not unlike NASA, is created to create and run these.

readthenotes1 1y ago
NASA seems to outsource a lot. Would you like Boeing to create the fab next door to you? What could go wrong??
- rjsw 1y ago
  You would still outsource running the fab to Intel, just have a government body overseeing it.
  - chatmasta 1y ago
    This won’t solve the biggest challenge/problem, which is lack of talent for staffing the fab. In Arizona they had to import a bunch of temp workers from Taiwan just to train the locals. We don’t have the skills. If you want to involve the government, maybe we should be training units of the military to make their own chips.
    - jurking_hoff 1y ago
      [dead]
    - ecshafer 1y ago
      How many workers do we need? TSMC has 80k workers all in. 15-24 there is about 3 million US NEETs. I think that we could have a 10 year plan to get 80k people with EE/CE/NanoTech Eng/ChemEng/etc degrees. Make college free, or hell even a stipend for people to pursue "Critical Careers", heavily fund Phds in the same areas for US Citizens, and we will see workers with the skills.
      - nemothekid 1y ago

dfxm12 1y ago

It's such a stunning dereliction the US let things get to this point. It's a side effect of systemically putting short term gains ahead of long term research. CHIPs act may be too little, it is certainly too late...

davedx 1y ago
> systemically putting short term gains ahead of long term research That's more the stock market than the US government though. You could argue the US government tries to play a long game, and often the way the US plays that game is to let the free market decide (hands off, small government). It's definitely a valid strategy and has worked extremely well in a number of other industries, but for this specific niche, less so, and even then you could argue it's down to Intel's mismanagement than anything the government could or should have done.
- dfxm12 1y ago
  It is clear that the government and wall street are generally of one mind on this. One recent specific way the government contributed to this is via the Tax Cuts and Jobs Act (TCJA) of 2017, which increased tax burden of R&D. They've also cut a lot of their own research funding (NIH, NSF). I can't make the argument that the government is "hands off, small government" because I simply don't see the evidence of that. To the contrary, I have seen things like TARP, stimulus checks, oh, and the government buying 10% of Intel.
  - hobs 1y ago
    The only people arguing against big government are republicans when democrats are in power, otherwise everyone is happy to expand spending.
  - macintux 1y ago
    Now that we have lawmakers openly declaring they would pick capitalism over democracy if forced to choose, I have little hope that the government will be receptive to changing anything structural.

nonethewiser 1y ago

Is it just me or is the author only making an argument for why Intel is too big to fail? He says hes steelmanning the equity stake but then he doesn't argue why it's necessary. He devotes 2 sentences to CLAIMING its necessary after aruging that Intel is too big to fail. The article is basically like this: > Leading edge domestic foundry companies are a national security concern. Therefor Intel is too big to fail. OK. Many can agree with this. And I think the author makes a very good argument for it. He makes some good points: - Startup cant replace Intel - US cant rely on TSMC alone - Artificial demand could actually improve Intel by solving the chicken and egg problem But that doesn't answer the question, "why the equity stake?" And for more context, it's replacing what would have been grants with the equity stake. So it's, "Why replace the $XB in grants with an equity stake?" He does touch on it but it's just a claim thrown in at the end: >The single most important reason for the U.S. to own part of Intel, however, is the implicit promise that Intel Foundry is not going anywhere. There simply isn’t a credible way to make that promise without having skin in the game, and that is now the case. OK, maybe. But that now needs to be argued for. The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms.

davedx 1y ago
Yeah he could have explained that more, maybe he's assuming familiarity with other public-private ventures around the world? If I was explaining it I would say "a huge equity stake gives you a lot of votes and influence over the company's strategic direction", including what the returns to shareholders should look like. Think of railways in countries where the government has say, a 50% stake.
- cthalupa 1y ago
  Except what the government purchased is a block of non-voting shares as long as the government holds them. So what benefit does that provide over grants?
yyyk 1y ago
>The US can give them money as grants. Grants put skin in the game for the US because they require Intel to meet the terms. It's not the same as taking part in decisionmaking? Intel could just say 'no' to grants. They don't have to accept the terms.

theMMaI 1y ago

Maybe the problem for Intel is complacency exactly because there is this expectation of a bailout when things don't go to plan. While other hardware companies got lean operationally and employee wise Intel did not. The ex-Intel employees all paint somewhat the same picture of bureaucracy, layers of (poorly managed) dependencies and reliance on paradigms that worked during late 90s / early 2000s. If you followed sources like semiaccurate the situation at Intel is not surprising either, they've been reporting on issues there since their inception.

roughly 1y ago

> Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over. What's annoying about this is that it's the same people who drove the outsourcing and decline of American industry who are using the same framework they've been using to drive that stunning dereliction to argue that this is the wrong approach.

craftkiller 1y ago

> over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? Over a decade ago Intel wasn't driving itself into the dirt. Their failure was just beginning approximately 1 decade ago, starting with their failure at EUV leaving them trapped on 14nm.

doytch 1y ago
Huh? He talked about and linked to a series of his older articles, including this one from 2013. [1] It's been a while. [1]: https://stratechery.com/2013/the-intel-opportunity/ https://stratechery.com/2013/the-intel-opportunity/
- craftkiller 1y ago
  That article is from before Intel started to decline. Quoting the end of that article: > Intel is already the best microprocessor manufacturing company in the world Intel was not driving themselves into the dirt if they are the best in their field. Instead, I'd suggest looking at when the process nodes were achieved: | | Someone Else | Intel | Lead | |------+----------------+-------+------| | 32nm | 2011 (Samsung) | 2009 | 2 | | 22nm | 2013 (IBM) | 2011 | 2 | | 14nm | 2015 (Samsung) | 2014 | 1 | | 10nm | 2017 (Samsung) | 2018 | -1 | | 7nm | 2018 (TSMC) | 2021 | -3 | Seems almost exactly a decade ago that Intel lost their lead and fell behind the competition.

hrq 1y ago

I believe something similar is happening in drug development right now. It may take less than 5, 10, 15 years to see the impact to the US. But from someone who has a vantage point to see it across many parts of the industry, including having seen the evolution of Intel / TSMC, I think it is a very similar story. Right now is like 2007 (or maybe even a bit later) for therapeutics. In the future, we will look back on this year as the year we gave it up.

CincinnatiMan 1y ago
It could be argued that new drug development is less needed during wartime than processor manufacturing.
- hrq 1y ago
  New drugs have changed the course of some wars!
esafak 1y ago
What's happening exactly?
- vel0city 1y ago
  Billions in grants have already been cancelled. Lots of research is losing its funding.
  - hrq 1y ago
    Agreed. Also the biotech industry is largely getting defunded. Venture funds are pointing dollars elsewhere so fewer new companies are being started, while more biotechs are being started in China. Most new drugs come from biotechs nowadays (not all of them, not GLP-1’s). But many do. If that innovation is happening in China and not the US today then it will create an issue in several years. We will not control our supply chain for a critical set of goods.
    - 1y ago

AceJohnny2 1y ago

This is the same reason France keeps propping up STMicroelectronics and their fab in Crolles, France (near Grenoble). There is strategic importance in maintaining home-grown capability. (it's also the same reason France keeps propping up many other industries, and sells weapons/jet fighters to other countries...)

ksec 1y ago

>It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over. There were a few of us warning about this well before it all happened in 2013 and 2014. Predicted the death of Intel, and surge of AMD and TSMC before majority of people even heard of TSMC. I also feel a little sad about TSMC, now that they have invested a lot in US but US is actively and strategically trying to pop up Intel to compete. But TSMC is at least 2 cycle ahead, meaning 5 - 6 years time. Unless TSMC make any mistakes even in the best case scenario I dont see Intel catching up within that time frame. Especially now they have little to no cash cow. Server, GPU, Consumer CPU are all under threats.

giantg2 1y ago

People have been raising this alarm for decades as more of our domestic manufacturing is off shored. Few listened then. It's unlikely we will come back from this.

reenorap 1y ago

The reason this pivot happened was because of the Pandemic. As soon as the Pandemic hit and China stopped sending us PPE it was a violent slap in the face and an extremely rude awakening that we are completely dependent on China and other countries for basic necessities. India also stopped sending us pharmaceuticals. This realization means that no matter what, Americans need to make certain basic necessities, and chips are one of them. I have friends at Intel that have been there for 20 years and they basically say it's dead man walking. They have chip equipment that they paid billions for that is sitting idle because they don't have the demand, but they can't turn them off otherwise it will be destroyed. However, these machines cost hundreds of millions to keep on. Plus they are already out of date compared to TSMC. The entire thing is a disaster, but Americans need an American source of chips so they have no choice but to double and triple down on a bad investment and hope that something happens that will let them become competitive again.

safety1st 1y ago

Well, there's a really easy and straightforward explanation for how this happened. It's just uncomfortable for everyone who's succeeded because of it. So they don't say it. America abandoned free enterprise in favor of managed monopolies. It happened via a wave of financialization, globalization, government bailouts, mergers and consolidation that all granted immediate financial benefits to shareholders, at the cost of long term competitiveness. That's it that's the whole story in a nutshell, look at Boeing, Intel and others, you'll see it again and again. This is not the right way and US economics are looking more like Mussolini's every day. Force these incumbents to compete. With fragments of each other, or with new American companies. Perhaps shelter them from some foreign competition if you really must. That would once again unlock the unparalleled power of the 350 million enterprising souls spread between the two coasts. Which is what got America to #1 in the first place. Give those souls something to do again that isn't meth or opiates. Managed monopolies are not the way.

lmm 1y ago
That's backwards. US companies moved manufacturing out of the US because other countries had competitive advantages (often cheaper labour), not because they weren't free enterprises but they were. Making stuff in the US doesn't make business sense. Patriotism doesn't make business sense. If you tell companies their business is to compete with each other to be the most profitable, that's what they'll do, and that's what they did.
- safety1st 1y ago
  It's not backwards. It's ECON101. Government makes policy. Government decides when and where to apply tariffs. If government applies a tariff on imports from any country that has cheap labor, businesses will stop offshoring to that country because it will no longer be cheaper. Or at least, that's what businesses do in a free market economy. In the free market where many firms compete for your dollar, they can and will compete on price when they have to. But in a "managed monopolies" economy like 2025 America, they may just raise prices instead because they have at most 2-3 competitors, and all it takes is a few games of golf, a wink and a nod to keep prices high. We used to call that a cartel, prosecute the shit out of those companies, and defend the free market. America's government stopped doing that. Now our enforcement is Luigi. When and where will the next Luigi strike? How many Luigis do you want to see? I would rather have government resume serving the People, it will work better, like it did with Standard Oil and AT&T. Patriotism is not required. Policy that puts the people first plus competent law enforcement against corporate crime is all that we need.

trhway 1y ago

>There won’t be a startup to fill Intel’s place. That’s Intel management’s FUD building a moat against such startups with the government’s help. Several billions of dollars is not a scary level of funding these days for such startups to happen. Plus CHIPS pile of hundreds of billions. Plus Nvidia, Google, Amazon, Apple and others can always form a consortium to build a foundry. A lot of options, yet all of them are being killed by the Intel management skillfully working the bronze ear. That is how a tech race is lost - by letting government instead of the market to pick winner.

speleding 1y ago

I would like to challenge the notion that you absolutely need state of the art fabs to win a war. Most military gear uses "proven technology" several generations behind SOTA. When push really comes to shove there is a lot you can do with the chips you already have and nationalizing the fabs under your control. The dependence on oil from the Middle East is comparatively a bigger problem for the West (though not for the US with its shale oil reserves).