Trump’s interest in Intel is also being driven by his desire to boost chip production in the U.S., which has been a focal point of the trade war.Terry Chea/The Associated Press
U.S. Commerce Secretary Howard Lutnick on Tuesday confirmed the U.S. government is vying for a 10 per-cent stake in Silicon Valley pioneer Intel Corp. INTC-Q in an unusual deal that would deepen the Trump administration’s financial ties with major computer chip manufacturers and punctuate a dramatic about-face from the President’s recent push to oust the company’s chief executive officer.
The ambitions that Mr. Lutnick confirmed in a televised interview with CNBC came the day after various news outlets reported on the negotiations between the Trump administration and Intel. The investment would be made by converting federal government grants previously pledged under former president Joe Biden’s administration into a bushel of Intel stock that would turn the U.S. government into one of the company’s largest shareholders.
“We think America should get the benefit of the bargain,” Mr. Lutnick told CNBC as he explained why President Donald Trump is pushing for the deal. “It’s obvious that it’s the right move to make.”
Intel declined to comment on the negotiations with the Trump administration.
The notion of the U.S. government holding a huge stake in Intel would have seemed inconceivable back in the company’s heyday when its processors were powering a personal computer boom that began in the mid-1970s. But Intel has been mired in tough times after missing mobile computing era unleashed by the iPhone’s 2007 debut.
Intel says it’s laying off 15% of workers as it grapples with manufacturing challenges
Intel has fall even farther behind in recent years during an artificial-intelligence craze that has been a boon for two of its once-smaller rivals, Nvidia Corp. and Advanced Micro Devices Inc. The Trump administration is hitching a ride on their success by imposing a 15 per-cent commission on their chip sales in China in exchange for their export licences. Those fees are expected to translate into billions of dollars in additional government revenue.
The U.S. government’s negotiations to become a major Intel shareholder are coming on the heels of a US$2-billion investment Japanese technology giant SoftBank Group Corp. disclosed late Monday that it plans to make in the Santa Clara, Calif., company. Softbank is accumulating its 2 per-cent stake in Intel at US$23 per share – a slight discount from the stock’s price when its investment was announced.
Intel’s shares surged nearly 7 per cent to close at US$25.31 on the news of Softbank’s big bet on Intel, coupled with Mr. Trump’s designs on the company.
SoftBank invests in an array of companies that it sees as holding long-term potential. It has been stepping up investments in the United States since Mr. Trump returned to the White House. In February, its chairman Masayoshi Son joined Mr. Trump, Sam Altman of OpenAI and Larry Ellison of Oracle Corp. in announcing a major investment of up to US$500-billion in a project to develop artificial intelligence called Stargate.
“Semiconductors are the foundation of every industry, Mr. Son said in a statement. “This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role.”
Mr. Trump’s interest in Intel is also being driven by his desire to boost chip production in the U.S., which has been a focal point of the trade war he has been waging throughout the world since he returned to the White House earlier this year for his second term in office. “We want Intel to be successful in American,” Mr. Lutnick said during his CNBC interview.
Boosting domestic production of computer chips also ranked high on the Biden administration’s agenda, which resulted in the 2022 passage of the CHIPS and Science Act.
Intel was among the biggest beneficiaries of the program, but it hasn’t been able to revive its fortunes while falling behind on construction projects spawned by the CHIPS program. The company has received about US$2.2-billion of the US$7.8-billion pledged under the incentives program – money Mr. Lutnick derided as a “giveaway” that would better serve U.S. taxpayers if it’s turned into Intel stock, which he said would be in the form of non-voting shares so the government wouldn’t be able to use the stake to sway how the company is managed.
But Intel’s ongoing struggles also mean the U.S. government is taking on a risky investment. The company is in the midst of its latest turnaround attempt under CEO Lip-Bu Tan, who was hired in March to shake things up. Mr. Tan’s turnaround effort so far has been focused on a cost-cutting spree that is gutting the company’s work force and further delaying construction on a chip plant in Ohio that has been in the works since 2022.
Intel’s market value is hovering around US$110-billion, only a slight uptick from where it was when Mr. Tan arrived and leaving it more than 60 per-cent below its peak reached about a quarter-century ago during the early phase of the internet boom.
In another strange twist to the new alliance, Mr. Trump had demanded that Mr. Tan resign in an Aug. 7 post spurred by concerns about investments Mr. Tan had made in China chip makers while he was working as a venture capitalist.
But Mr. Trump backed off after the Malaysia-born Mr. Tan professed his allegiance to the U.S. in a public letter to Intel employees and went to the White House to meet with the President, who applauded the Intel CEO for having an “amazing story.” That truce apparently sparked the negotiations that may culminate in the U.S. government owning a chunk of Intel.
Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly US$50-billion into General Motors Co. in return for a roughly 60 per-cent stake in the auto maker at a time it was on the verge of bankruptcy. The government ended up with a roughly US$10-billion loss after it sold its stock in GM.