Fine print in Intel's CHIPS Act deal includes requirement to keep control of its foundries

Intel has quietly revealed that the $7.86 billion of cash coming its way thanks to the US CHIPS Act came with conditions that include Chipzilla retaining control of its foundries – an asset the struggling silicon giant may have intended to offload. That condition and several others are spelled out in a November 27 filing [PDF …

[Pascal Monett]

Tough

Intel has long been a leader in the silicon industry. Hell, without Intel the computing landscape we have today simply wouldn't exist.

I have no empathy for a corporation. The US Government has, rightly, decided that it needs to guarantee the country's independance concerning critical technical products. The Board at Intel needs to toe the line, however much that might not be financially interesting for them right now.

[druck]

Re: Tough

Hell, without Intel the computing landscape we have today simply wouldn't exist.

Yes, without Intel's legacy x86 baggage and monopolistic practices which destroyed every other competing chip architecture (except ARM), things would look very different, and maybe even a lot better.

[An_Old_Dog]

Re: Tough

Do you think that if Intel had not risen to the position it has, that no other chipmaker would have risen to a similar position, with architectural baggage, monopolistic practicies, and all? Would you prefer we be programming the descendants of, say, the Signetics 2650?

[Yorick Hunt]

Re: Tough

I'd hoped back in the day that the future would belong to Motorola or Zilog - or even (gasp!) the Transputer.

Sadly we'll be using essentially hyperscaled 8080s for a long time to come - unless ARM takes over or RISC-V actually gets bedded down (in both cases sacrificing compactness for speed, but then programmers these days don't even know what compactness is, let alone care about it).

[Justthefacts]

Re: Tough

Exactly wrong. I don’t even have an opinion which industrial strategy Intel should follow. They’re in a difficult place, and no strategy has more than a 50/50 survival chance. But the one thing they shouldn’t do is “toe the line”, or indeed take Chips funding. That’s a definite path to insolvency, precisely because you get told what to do, for political rather than business reasons, and those decisions are always opposite to standard business logic.

They need to decide the correct (ie survivable) strategy *first*, and if that happens to align with where the govt funding is, great. And if it doesn’t, you ignore the funding. Because if you get it wrong, all that happens is you’ve spent $8bn (or $50bn) of somebody else’s money, but you are still in exactly the same doomed place. And more than that, the time opportunity has passed you by, and your fate is certain.

For those who say “ah, but as a CEO it’s your fiduciary duty to take the money”, your duty is to act in the best *long term* interests of the company, both shareholders, employees, and customers actually. And for those who say “ah but if you take govt money, you get to keep your job as CEO”, no you don’t. In fact, the CEO job no longer exists, and you’ve become the proud holder of a rather short-term role as message-carrier from some bureaucrat nobody has ever heard of.

A good analogy is - if somebody offers you €10M to jack in your job, on the condition you bet everything including your house on one hand of poker in the casino, should you take it? Technically, it’s positive expectation, because €10M is a 50/50 shot of far more than you stand to lose. But it’s a terrible deal - if you lose, you’ve lost all your assets and lost your means to support yourself . But almost more importantly, if you *win*, you’ve put yourself in the position of *being the sort of person to do that stupid thing*, with €10M in their pocket who has convinced themselves they are really good at poker and no other way to support themself. And the guaranteed future of the person in that position, is to continue gambling until they’ve lost it all. There is no upside outcome in that decision, however it naively looks.

[Doctor Syntax]

Re: Tough

"Because if you get it wrong, all that happens is you’ve spent $8bn (or $50bn) of somebody else’s money"

At which point a few more $bn of someone else's money has to be poured in so that the previous $bns are not seen to be going down the drain.

[Justthefacts]

Re: Tough

Yes, but you seem to be under the assumption that “receiving more billions” is an end in itself, and a net benefit to you.

But actually it isn’t, no more than if a sugar daddy agrees to fund your cocaine habit. Just because your sugar daddy spent lots of money, doesn’t mean you end up better off. It’s not a zero sum game. Theres all the things you *could* have done with your life, but now won’t.

[Justthefacts]

Re: Tough

The other aspect that’s worth mentioning, is that people often say smthg like “ooh but protecting jobs”.

And that’s not right either, because there’s a subtle point that never gets discussed, and doesn’t appear in statistics. These are *horrible places to work*. Yes, you might keep your job; and the govt might even subsidise it enough to maintain your salary. But companies that lose money, just have a *vile* atmosphere. Everyone becomes back-stabby; every conversation becomes about avoiding blame for failure; managers become super-micro-managey; there’s just portions of anger and bitterness and dis-illusion to go round for everybody.

On paper, you’ve kept your job and still pay the mortgage. But man, is everyone miserable at these zombie companies.

[RedGreen925]

Re: Tough

"In fact, the CEO job no longer exists, and you’ve become the proud holder of a rather short-term role as message-carrier from some bureaucrat nobody has ever heard of."

Nobody held gun to their head to start them sucking on the public tit they jumped at the chance to take it. The government quite rightly wants to ensure they don''t take the money and run, that it gets spent in ways to try and benefit the country. If they don't want it like that they can sink or swim on their own. I for one have had more than enough of the parasite corporations taking the government cash then doing whatever the hell they please with the money.

[PRR]

Re: Tough

> Hell, without Intel the computing landscape we have today simply wouldn't exist.

Without Andy Grove the world would be quite different.

Andy fled Hungary, became a busboy, and studied surface-states which led to a book 'Physics and Technology of Semiconductor Devices (1967)' which made MOS phenomenon manageable. A book is just a book but Intel bet the barn and is a major reason I have an EKG on my wrist and a Web in my pocket. BJT and JFET devices were never going to get to where MOS devices got.

Yeah, that's almost 60 years ago, and nobody is left from those days, and I don't say we should cut today's Intel any slack for past glory.

[Richard 12]

Government competence!!

Well, that was fun while it lasted.

[Anonymous Coward]

Re: Government competence!!

There's a reason we can now measure time in nsec.

That said, in the UK they measure in lettuce degradation which, I'd argue, is simply a result of the British sense of humour :).

[O'Reg Inalsin]

Chip Design and Fab - Two systems with completely different dynamics

Intel the chip designer has it's own own problems, but the chip design market is such that Intel could realistically make a comeback without 8 billion in government subsidies.

Fab is entirely different - for the US the problem is that due to a poisoned faux-capitalism bias in the economy, investors have zero reason to invest 8 billion which won't see dividends for 5 years.

In contrast, market forces can easily spark a fire that whips up 800 billion dollars for crypto, which generate 8 billion in profits in a matter of months, weeks, or even days. Crypto producing absolutely nothing but suckers and winners notwithstanding, big money can afford to pay the experts to be on the winning side more often than not (until one day ... ?). It's not just crypto - the US market provides a number of financial engineering instruments and bubbles machines to play with. And if things get really bad, the US will just print money again.

Obviously, Intel-Fab is not the cause of the US economy's poisoned faux-capitalism bias, and the real fix that needs to be made is removing the bias. However, in the meantime it's arguably reasonable to resort to communist-style top down planning just to keep Fab ticking over so the skills and tech is not lost completely - although it is far far from ideal.

I'm afraid that if Intel Fab is not completely separated from Intel Chip Design, Intel Chip Design will get swallowed up in the inefficiencies that are bound to occur in the government subsidized Fab part.

[nautica]

No kidding!

"Intel has quietly revealed that the $7.86 billion of cash coming its way thanks to the US CHIPS Act came with conditions that include Chipzilla retaining control of its foundries..."

The very last thing that Intel wanted; it ('they') wanted the money with absolutely no strings attached...of course.

[TM™]

The US Government May Have Just Saved Intel

With one tiny rule the US government may have just saved Intel and it's CEO Gelsinger. I bet he's absolutely over the moon at the 'imposition' (not to mention the free money).

Intel went off the rails because of classic American MBA greedy accounting and mangement. Gelsinger was trying to turn it back into an innovator but the bean counters and investors forced him to double down on the old policies that was destroying Intel, not least off loading its manufacturing. With this rule Gelsinger now has an excuse to turn Intel back into an engineering company. Without it AMD and NVidia were going to eat Intel's lunch and pop the bag (yes I know they're fabless, but Intel needs to be innovative not follow).

[O'Reg Inalsin]

Re: The US Government May Have Just Saved Intel

TSMC's R&D budget is no less impressive. Starting in 2021 and through the end of 2022, it spent more than $13 billion on R&D and expects to increase the budget for 2023 by as much as 20 percent from the 2022 level of $5.5 billion, according to Wendell Huang, chief financial officer.

It's not a one-off. Intel-FAB will need at least $8 billion EVERY YEAR until it becomes profitable (in the civilian non-US-mil) market in 5 years at the earliest. For some reason, that is fine if you are a online sales company, or operating a monopoly online-taxi / food delivery service - then you can go forever with tiny or even any profit.

But for FAB - the US free market doesn't like it and won't invest.

The chip design part of Intel requires a lot less capital and can turn a profit a lot sooner, without any help.

[Anonymous Coward]

Re: The US Government May Have Just Saved Intel

Well, Pat wasn't "saved" anyway, at least not his Intel CEO job, as it turned out a few days later....

[retiredmonkey]

" Uncle Sam's stipulations do mean Intel can't realize the full value of its chip manufacturing arm "

Considering that the value is probably negative, that might not be such a bad thing.