President Donald Trump is pushing for the U.S. government to take a stake in Intel, less than two weeks after calling for the ouster of the Silicon Valley pioneer's CEO, who was hired to turn around the slumping chipmaker.
Such a move would mark a deeper government role in the computer industry as Trump intensifies pressure on U.S. firms to manufacture domestically rather than depend on overseas suppliers.
The Trump administration is in talks to secure a 10% stake in Intel in exchange for converting government grants that were pledged to Intel under President Joe Biden.
If the deal is completed, the U.S. 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.
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 (AMD), two companies whose chips are helping to power the craze around artificial intelligence, to pay a 15% 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 U.S., 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 U.S. will be better positioned to maintain its technological lead on China in the race to create artificial intelligence.
That's what the president said on Aug. 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 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."
The company isn't commenting about the possibility of the U.S. 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 AI craze that has been a boon for Nvidia and AMD. The company lost nearly $19 billion last year and another $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% reduction from the end of last year.
The company was thrown a lifeline this week after Japanese tech giant announced it would make a $2 billion capital injection into Intel. That will make SoftBank a top-10 shareholder 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 $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy.
The government ended up with a roughly $10 billion loss after it sold its stock in GM.
U.S. 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 favor with the president to increase their orders for the company's chips.
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 $2.2 billion of the $7.8 billion pledged under the incentives program – money that Lutnick derided as a "giveaway" that would better serve U.S. taxpayers if it's turned into Intel stock. "We think America should get the benefit of the bargain," Lutnick told CNBC. "It's obvious that it's the right move to make."
Lutnick's view was echoed by liberal Senator Bernie Sanders on Wednesday.
Sanders threw his support behind Trump's plan to convert grants to chipmakers, including $10.9 billion for Intel, into government stakes in the companies.
"If microchip companies make a profit from the generous grants they receive from the federal government, the taxpayers of America have a right to a reasonable return on that investment," Sanders, an Independent who caucuses with Democrats, said in a statement to Reuters.
The unusual alignment between Sanders and Trump on government ownership stakes in private companies highlights a marked shift by the president toward policies of state intervention in the economy that are typically associated with the left.
