Washington: President Donald Trump said that Intel has agreed to give the US government a 10 per cent stake in its business.
Speaking with reporters Friday, Trump said the deal came out of a meeting last week with Intel CEO Lip Bu Tan — which came days after the president called for Tan to resign over his past ties to China.
“I said, I think it would be good having the United States as your partner,” Trump said. “He agreed, and they’ve agreed to do it.”
The official announcement is expected to come later Friday, according to a White House official who was not authorised to speak publicly ahead of an announcement and spoke on condition of anonymity.
What’s happening?
The Trump administration has been in talks to secure a 10 per cent stake in Intel in exchange for converting government grants that were pledged to Intel under President Joe Biden. If the deal is completed, the US government would become one of Intel’s largest shareholders and blur the traditional lines separating the public sector and private sector in a country that remains the world’s largest economy.
Why would Trump do this?
In his second term, Trump has been leveraging his power to reprogram the operations of major computer chip companies. The administration is requiring Nvidia and Advanced Micro Devices, two companies whose chips are helping to power the craze around artificial intelligence, to pay a 15 per cent commission on their sales of chips in China in exchange for export licenses.
Trump’s interest in Intel is also being driven by his desire to boost chip production in the US, which has been a focal point of the trade war that he has been waging throughout the world.
By lessening the country’s dependence on chips manufactured overseas, the president believes the US will be better positioned to maintain its technological lead on China in the race to create artificial intelligence.
Didn’t Trump want Intel’s CEO to quit?
That’s what the president said August 7 in an unequivocal post calling for Intel CEO Lip-Bu Tan to resign less than five months after the Santa Clara, California, company hired him.
The demand was triggered by reports raising national security concerns about Tan’s past investments in Chinese tech companies while he was a venture capitalist.
But Trump backed off after Tan professed his allegiance to the US 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.”
Why would Intel do a deal?
The company isn’t commenting about the possibility of the US government becoming a major shareholder, but Intel may have little choice because it is currently dealing from a position of weakness.
After enjoying decades of growth while its processors powered the personal computer boom, the company fell into a slump after missing the shift to the mobile computing era unleashed by the iPhone’s 2007 debut.
Intel has fallen even farther behind in recent years during an artificial intelligence craze that has been a boon for Nvidia and AMD. The company lost nearly USD 19 billion last year and another USD 3.7 billion in the first six months of this year, prompting Tan to undertake a cost-cutting spree.
By the end of this year, Tan expects Intel to have about 75,000 workers, a 25 per cent reduction from the end of last year.
Would this deal be unusual?
Although rare, it’s not unprecedented for the US 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 USD 50 billion into General Motors in return for a roughly 60 per cent stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly USD 10 billion loss after it sold its stock in GM.
Would the government run Intel?
US Commerce Secretary Howard Lutnick told CNBC during a Tuesday interview that the government has no intention of meddling in Intel’s business, and will have its hands tied by holding non-voting shares in the company.
But some analysts wonder if the Trump administration’s financial ties to Intel might prod more companies looking to curry favour with the president to increase their orders for the company’s chips.
What government grants does Intel receive?
Intel was among the biggest beneficiaries of the Biden administration’s CHIPS and Science Act, but it hasn’t been able to revive its fortunes while falling behind on construction projects spawned by the program.
The company has received about USD 2.2 billion of the USD 7.8 billion pledged under the incentives program — money that Lutnick derided as a “giveaway” that would better serve US taxpayers if it’s turned into Intel stock.
AP
