News Intel CEO complains 'this is taking too long' after investing $30B but receiving zero CHIPS Act funding

[Maxor1]

It turns my stomach seeing these wealthy fat cats with their hands out for our money.

I know CHIPS is popular with many around here and that's exactly why corporate welfare never dies. Someone is a fan of it somewhere, and you just have to find the special interest crowd supporting it to keep the gravy train running.

CHOO CHOO! CHOO CHOO!

So I don't like corporate or any handouts, but that's not what chips is/was about it was about the idea that a decent number of new Fabs needed built, and instead of building them somewhere else the US was willing to invest part of the difference in cost to build them in the US and use some tax breaks to make up the rest. Now a couple years later after intel (and some others) have invested quite a lot of their own money the government isn't holding up their side of things. Its hurting intel more than some others but its also in other folks pockets as well. Intel also has some other things going on (part of which are wall street hype based) but you have a huge pillar of tech basically going through a rough patch. (the 13th and 14th gen issues are a thing and expensive but also mitigated against new instances core that isn't sinking a company with the size and market share of intel in just a couple of years ultra is just slightly disappointing performance wise)however investment news did a few sky is falling pieces so a bunch of casuals with no understanding of tech pulled a ton of money out and it's putting intel in a position that hedge fund/other money can make a play on the company. Meanwhile intel which a couple of years ago was sitting on huge capitol from raking in profits for about a decade of lackluster competition started investing in a major capitol project with chips and doesn't have a bunch of loose funds to stave off that and signal investors that it has confidence with a major stock buyback while its stock prices are down.

 

[ottonis]

Someone familiar with the Chips Act should comment on the precise conditions for actual payment of grants to chip makers such as Intel. My guess is that the 8.5 billions of government money is indeed tied to specific conditions that Intel first needs to meet before receiving payments - and that Intel ,probably has not met these prerequisites as of yet.
In my opinion, the Intel CEO is trying to deflect from Intel's own poor performance in the recent years and found it an excellent idea to blame the government for allegedly missing payments.

 

[Nyara]

Someone familiar with the Chips Act should comment on the precise conditions for actual payment of grants to chip makers such as Intel. My guess is that the 8.5 billions of government money is indeed tied to specific conditions that Intel first needs to meet before receiving payments - and that Intel ,probably has not met these prerequisites as of yet.
In my opinion, the Intel CEO is trying to deflect from Intel's own poor performance in the recent years and found it an excellent idea to blame the government for allegedly missing payments.

The CHIPS act was sent as a federal statute by Biden and approved by the congress. The thing is, as in any statute, all the money is ultimately managed by the local governments of each state. The law gave them a period of 6 years to distribute the money after the central federal government decided to give a grant.

Republicans changed of mind about CHIPS around a year ago, and they are now calling to boycott and eventually repeal the law (which they hope they can achieve if they gain the majority in both cameras after this election), so they are delaying giving the money, to hopefully end up never giving it through repealing the law.

Intel is just one of other 258 companies stuck in the exact same situation unless they were given grants on Democrat governed states, or the grants were given before the Republicans changed of mind.

In my personal opinion, Republicans are being really stupid, as they are making the government lose its seriousness and trustworthiness (this, in return, is exactly what they want, to raise their political position over Democrats, but being foolish in that if they take the power, they will deal with the own mess they produced), and also telling private companies they will help them to then not help them, in a key sector as semiconductors is, is beyond dumb. If Republicans weren't sure about the act, they shouldn't have never voted to approve it to start with.

Now I don't think the law was very smartly put to start with, yes, so that is the underlying cause, it was never a smart act.

And ultimately, if the money will be given anyway (assuming Republicans doesn't wins both cameras now to repeal), might as well just give it when it is the most useful, and not when it no longer matters.

 

[phead128]

No critical mass of secured customers, reports of 18A yields issues, mass layoffs of 15,000 job, outsourcing Lunar Lake and Arrow Lake and parts of Panther Lake to UnStAbLE TaIWaN TSMC, cutting R&D and delaying fabs, rumors of spinning IFS as separate entity. If I was US govt, I would be hesitant too and also demand milestones requirements. No amount of xenophobic scaremongering can overcome a lack of competence at Intel. You can't freeload your way into competitiveness on someone else's dime.

 

[ottonis]

The CHIPS act was sent as a federal statute by Biden and approved by the congress. The thing is, as in any statute, all the money is ultimately managed by the local governments of each state. The law gave them a period of 6 years to distribute the money after the central federal government decided to give a grant.

Republicans changed of mind about CHIPS around a year ago, and they are now calling to boycott and eventually repeal the law (which they hope they can achieve if they gain the majority in both cameras after this election), so they are delaying giving the money, to hopefully end up never giving it through repealing the law.

Intel is just one of other 258 companies stuck in the exact same situation unless they were given grants on Democrat governed states, or the grants were given before the Republicans changed of mind.

In my personal opinion, Republicans are being really stupid, as they are making the government lose its seriousness and trustworthiness (this, in return, is exactly what they want, to raise their political position over Democrats, but being foolish in that if they take the power, they will deal with the own mess they produced), and also telling private companies they will help them to then not help them, in a key sector as semiconductors is, is beyond dumb. If Republicans weren't sure about the act, they shouldn't have never voted to approve it to start with.

Now I don't think the law was very smartly put to start with, yes, so that is the underlying cause, it was never a smart act.

And ultimately, if the money will be given anyway (assuming Republicans doesn't wins both cameras now to repeal), might as well just give it when it is the most useful, and not when it no longer matters.

Thank you fir explaining. I was not familiar with these details.

 

[JTWrenn]

I work in chemical manufacturing in the United States. Make a decent hourly wage and it isn't uncommon for me to make $100k of product in a day. The cost of my time is negligible compared to that.

Those ASML machines are not valuable for that many years and the expense of the setup and materials to use them and make chips cost even more. You divide the factory price by the useful life and add in the material costs and amount of money needed per work hour is huge.

You need to get these labor costs in perspective. Compared to the other costs in a fab they are meaningless. One day of downtime because of infrastructure issues might be worth a year in labor cost savings.

Not that I have any problem with South America being a preferred continent for outsourcing. The world would be a better place if their stereotypical cultural values were more widespread. But I don't think there is any net financial benefit for Intel to outsource manufacturing there.

Then why wouldn't we already have it? I think for high end chip production you might be right and that done in the USA isn't a horrible idea, but we have a ton of other components that use much less expensive equipment and infrastructure and need more labor because they just make so many more of them. The 20nm and up products that are all made in China and Vietnam are there for a reason. Lower environmental controls and cheap labor.

If all you say is true...I feel like it would already be here, but it's not for a reason and the only thing I can think is cost. Maybe not just labor, but everything else is damn hard to come by at reasonable cost here and I feel like south america which is quite mineral rich would make a lot more sense but be much easier to secure. That is exactly why China is belt and road attacking it right now and we are going to find that we have been surrounded economically. We are playing chess and they are playing chinese checkers.

 

[Nyara]

Then why wouldn't we already have it? I think for high end chip production you might be right and that done in the USA isn't a horrible idea, but we have a ton of other components that use much less expensive equipment and infrastructure and need more labor because they just make so many more of them. The 20nm and up products that are all made in China and Vietnam are there for a reason. Lower environmental controls and cheap labor.

If all you say is true...I feel like it would already be here, but it's not for a reason and the only thing I can think is cost. Maybe not just labor, but everything else is damn hard to come by at reasonable cost here and I feel like south america which is quite mineral rich would make a lot more sense but be much easier to secure. That is exactly why China is belt and road attacking it right now and we are going to find that we have been surrounded economically. We are playing chess and they are playing chinese checkers.

I will put some things on perspective. Say you are Intel, and you sell CPUs for $500 each, and you plan to sell 1,000,000 of those, for a total of $500,000,000 (500 million) revenue. Now, ignoring R&D, say I need 10,000 workers through 2 years for it, so I pay an average of $1000 through 24 months, or 10,000 x 24,000 = $240,000,000 (240 million) cost. This is really expensive, right?

But what if instead I sold 10 million CPUs. Now my income would be of 5 billions, or 240 millions / 5 billions = 4.8% of my expenses. This is about the real-life ratio that CPU makers manage per scale with labour. Now, I used $1000 wage, but if I changed this for $2000 wage, it would be now 9.6% the expenses. This wage difference is the difference you see from hiring in the US or in China.

So, wage differences definitively matter, but what made people so attracted to China was not really that, but the policy that for every foreign investment, a 51% of Chinese investment must follow as well. So the total amount of investment, or the amount of risk, for foreigners, is just way lower for big scaled stuff.

But this is not something exclusive of China: the Taiwanese goverment for example puts huge amounts of capital support for TSMC, which lowers the risk of all investments massively, while offering tax benefits and other things. Taiwan does not even have cheap labor: it is more expensive than in the US, but having a gov pay the bill is a massive incentive for any private.

So in a lot of regards there isn't anything exactly worse the US is doing specifically, and really there is little impact (since number of workers is tiny for high tech) outside of geopolitics of whichever the fab is ultimately built, as long the profits goes to an US company.

But geopolitics matters, and here we are. And if the political objective is for them to build stuff on the US, then they will either need to incentive them to it like other countries ae doing (CHIPS Act) or simply force the private companies through law or warning of punishment (Trump's ways).

 

[joeer77]

I will put some things on perspective. Say you are Intel, and you sell CPUs for $500 each, and you plan to sell 1,000,000 of those, for a total of $500,000,000 (500 million) revenue. Now, ignoring R&D, say I need 10,000 workers through 2 years for it, so I pay an average of $1000 through 24 months, or 10,000 x 24,000 = $240,000,000 (240 million) cost. This is really expensive, right?

But what if instead I sold 10 million CPUs. Now my income would be of 5 billions, or 240 millions / 5 billions = 4.8% of my expenses. This is about the real-life ratio that CPU makers manage per scale with labour. Now, I used $1000 wage, but if I changed this for $2000 wage, it would be now 9.6% the expenses. This wage difference is the difference you see from hiring in the US or in China.

So, wage differences definitively matter, but what made people so attracted to China was not really that, but the policy that for every foreign investment, a 51% of Chinese investment must follow as well. So the total amount of investment, or the amount of risk, for foreigners, is just way lower for big scaled stuff.

But this is not something exclusive of China: the Taiwanese goverment for example puts huge amounts of capital support for TSMC, which lowers the risk of all investments massively, while offering tax benefits and other things. Taiwan does not even have cheap labor: it is more expensive than in the US, but having a gov pay the bill is a massive incentive for any private.

So in a lot of regards there isn't anything exactly worse the US is doing specifically, and really there is little impact (since number of workers is tiny for high tech) outside of geopolitics of whichever the fab is ultimately built, as long the profits goes to an US company.

But geopolitics matters, and here we are. And if the political objective is for them to build stuff on the US, then they will either need to incentive them to it like other countries ae doing (CHIPS Act) or simply force the private companies through law or warning of punishment (Trump's ways).

We are not Taiwan. We are not a socialist country. We are capitalist society. My tax money should not be going to private companies that make billions and provide zero dollars in return for my investment.

 

[Nyara]

We are not Taiwan. We are not a socialist country. We are capitalist society. My tax money should not be going to private companies that make billions and provide zero dollars in return for my investment.

No issue. Just avoid complaining about "works leaving the country" or "we are falling behind on X or Y thing" or "we collapsed since the rest stopped trusting the dollar since the goverment printing it became unserious", among other consequences and it is all good.

You all shape your country as you wish but you also assume the respective consequences of it, too. Just make sure to be serious and consistent in anything you do if you want others to trust in you and take you seriously, yes. This applies for all countries doing any kind of policy, too.

 

[JTWrenn]

But what if instead I sold 10 million CPUs. Now my income would be of 5 billions, or 240 millions / 5 billions = 4.8% of my expenses. This is about the real-life ratio that CPU makers manage per scale with labour. Now, I used $1000 wage, but if I changed this for $2000 wage, it would be now 9.6% the expenses. This wage difference is the difference you see from hiring in the US or in China.

Except that the average pay per machine worker in the USA is about 32.5k and in Mexico it is under 5k. The entire reason it was shipped over seas is because of lower labor, material, property, and regulatory costs. Not just labor. If we bring it back to the USA all of that goes up. If we bring it to Mexico it actually goes DOWN. It helps solve immigration issues. It would help to break up gangs by offering saner alternatives to young people.

There are a ton of down stream reasons for it.

So you seem to be saying labor and cost are not the thing just incentives from the government? I don't agree but if that was true then the CHIPS act should have solved it and it hasn't either. I think it is all of it, and unless we push incentives for secure locations with reasonable regulations and labor markets it just won't work.

The truth is Americans by and large don't want to do these jobs...they want to do service and computer jobs mostly. So we should be pushing that.

 

[phead128]

We are not Taiwan. We are not a socialist country. We are capitalist society. My tax money should not be going to private companies that make billions and provide zero dollars in return for my investment.

The true irony is Intel CEO Pat Gelsinger publically states Taiwan is "GeOPoLiTiCal RiSkY", yet continues to outsource 100% of Lunar Lake, 100% of Arrow Lake, and sizeable portion of Panther Lake to RiSkY Taiwan TSMC for manufacturing.

I guess Pat Gelsinger wants to have his cake and eat it. (i.e., free taxpayer money while outsourcing manufacturing to Taiwan, laying off employees, cutting R&D spend)

 

[Nyara]

Except that the average pay per machine worker in the USA is about 32.5k and in Mexico it is under 5k. The entire reason it was shipped over seas is because of lower labor, material, property, and regulatory costs. Not just labor. If we bring it back to the USA all of that goes up. If we bring it to Mexico it actually goes DOWN. It helps solve immigration issues. It would help to break up gangs by offering saner alternatives to young people.

There are a ton of down stream reasons for it.

So you seem to be saying labor and cost are not the thing just incentives from the government? I don't agree but if that was true then the CHIPS act should have solved it and it hasn't either. I think it is all of it, and unless we push incentives for secure locations with reasonable regulations and labor markets it just won't work.

The truth is Americans by and large don't want to do these jobs...they want to do service and computer jobs mostly. So we should be pushing that.

Major factors in deciding an international company's high tech country are taxes and capital costs. Taxes are usually between 60%-90% the total expenses of any company, while big capital expenses always carries a risk factor and most companies prefers to just play it safe (continue doing the same they always do) at the face of no help after a given scale. Property, wages, materials and regulations are secondary or close to irrelevant other than avoiding extreme scenarios.

For US companies, usually the US is already very favorable, and in fact the immense majority of works are generated by, well, US companies, for US workers, in the US, contrary to any myth. Taxes are among the lowest in the world and state governments nearly 99% of time offers further support like in gifting the land or providing materials, electricity and what not. Silicon Valley itself pays virtually no taxes to California, for example.

So, what makes US companies occasionally make some (not all) investments outside? Well, because they do direct conversations with other countries and ask them if they can offer them conditions that are even better than in the US, for example Costa Rica exempted them from ALL taxes for 15 years + land gift + material provision, and are just now charging a small amount, with Costa Rica preferring Intel to help them with education and charity services to increase the expertise level in the country. Sure, lower wages are a plus, but ultimately no taxes is going to move anybody to press yes.

Or China, which literally covers 51% of your capital investment, that literally allowed multiple companies to double their capital return rates until conditions tightened recently. Or Ireland which is a tax haven. Or Israel which assured to cover a large part of Intel's capital costs. Or Germany which literally gave 17 billion Euros to Intel to build a fab on Germany.

So the CHIPS Act came as an action to replicate the same, so Intel would get tax benefits and capital injections in exchange to build two extra mega factories in the US, alongside many of the ones they already have. And, Intel is actually building them, albeit with some delays (if anything, due to the government failing to comply with their part of the agreement and Intel literally not having more capital).

And, it is not like republicans doesn't have intentions to have those two factories built. It is just that instead of incentivizing Intel (or other US companies), they prefer the approach of just force them to do that "or else" route, which in all honestly is fair since they helped in building those companies to start with, and any profit will remain for them anyway.

But it looks very poorly on the government to take one action and then sabotage it and take a different one later, seriousness is a lot of times more valuable than any tax break. Republicans should have thought this better before approving CHIPS in the congress to start with, and both Republicans and Democrats should coordinate better stuff like this, so policymaking is less susceptible to election cycles.

AMD by its part started with much smaller capitals, so they never managed to make a competitive foundry, so they have always just brought the best from any foundry available. TSMC is that one today, after the Taiwanese government poured astronomical capitals and benefits and education and other stuff to make sure it would grow, and it did indeed grow, and it is now attracting capital from the whole globe and running by itself and the gov is profiting back from it.

Now personally I do not believe Intel needs more help from the US government specifically, yes, but I am just explaining a bit the dynamics of what makes high tech companies pick the countries for their investments. Other fields (like lower-end manufacture) definitively flocks to cheaper wage countries, and others flocks whichever regulations are the weakest and so on, depending on their activities.

 

[bluvg]

We are not Taiwan. We are not a socialist country. We are capitalist society. My tax money should not be going to private companies that make billions and provide zero dollars in return for my investment.

1. Taiwan is also capitalist. According to The Heritage Foundation, Taiwan ranks as one of the 10 most capitalist countries in the world. The US doesn't make that list.
2. TSMC wouldn't be what it is today without help from the Taiwan govt.
3. It depends what you mean by return on investment (the govt is not a public company); govt in the US (federal/state/etc.) and other countries provides all kinds of investment/incentives/tax breaks to businesses, with typically little direct return to the taxpayer. But it's very hard to argue dropping all of that would result in a better economic situation for the taxpayer.

I suspect if Intel were doing wildly well, this would be a different discussion. It's uncomfortable to invest in Intel when they're flailing today, but the US is left with two options: accept the national security risk of no modern fabs on-soil, or invest publicly in modern fabs in the US. Who besides Intel is a better candidate?

 

[phead128]

1. Taiwan is also capitalist. According to The Heritage Foundation, Taiwan ranks as one of the 10 most capitalist countries in the world. The US doesn't make that list.
2. TSMC wouldn't be what it is today without help from the Taiwan govt.
3. It depends what you mean by return on investment (the govt is not a public company); govt in the US (federal/state/etc.) and other countries provides all kinds of investment/incentives/tax breaks to businesses, with typically little direct return to the taxpayer. But it's very hard to argue dropping all of that would result in a better economic situation for the taxpayer.

I suspect if Intel were doing wildly well, this would be a different discussion. It's uncomfortable to invest in Intel when they're flailing today, but the US is left with two options: accept the national security risk of no modern fabs on-soil, or invest publicly in modern fabs in the US. Who besides Intel is a better candidate?

US just wants modern fabs on it's soil, whether foreign-owned, domestic-owned, it doesn't care. The CHIPS ACT doesn't favor domestic vs. foreign ownership, otherwise TSMC and Samsung would be rejected from funding. Also, it proves US doesn't want to ad infinitum fund a second-rate domestic option for the sake of "Rah Rah US patriotism" because that is a blackhole as far as Intel's performance is concerned. It's hedging it's bets with proven foreign-own modern fabs for a reason. Otherwise, they would just take money given to TSMC/Samsung and allocate all to Intel, but Intel can't perform, so US Gov't hedges it's bet.

 

[Nyara]

US just wants modern fabs on it's soil, whether foreign-owned, domestic-owned, it doesn't care. The CHIPS ACT doesn't favor domestic vs. foreign ownership, otherwise TSMC and Samsung would be rejected from funding. Also, it proves US doesn't want to ad infinitum fund a second-rate domestic option for the sake of "Rah Rah US patriotism" because that is a blackhole as far as Intel's performance is concerned. It's hedging it's bets with proven foreign-own modern fabs for a reason. Otherwise, they would just take money given to TSMC/Samsung and allocate all to Intel, but Intel can't perform, so US Gov't hedges it's bet.

It is true it does not matter which company or from which country does it and matters more where it is done. However, the US government did give a small fortune to TSMC for a fab in US soil and just after receiving the money (literal next day), TSMC proceeds to delay/semi-cancel it and refocus resources in their SEA fab plans instead, so the US government is definitively not very happy with the idea of giving them more money until they commit.

Of course the US government is not very happy with giving money to Intel neither, but they might end with no new fabs like that, too.

 

[phead128]

It is true it does not matter which company or from which country does it and matters more where it is done. However, the US government did give a small fortune to TSMC for a fab in US soil and just after receiving the money (literal next day), TSMC proceeds to delay/semi-cancel it and refocus resources in their SEA fab plans instead, so the US government is definitively not very happy with the idea of giving them more money until they commit.

Of course the US government is not very happy with giving money to Intel neither, but they might end with no new fabs like that, too.

US gov't last week guaranteed $6.6 disbursement to TSMC before December (source), whereas Intel still hasn't received a single penny. Keep dreaming if you think US gov't will fund Intel as priority over TSMC for the sake of "Rah Rah US patriotism". The exact opposite just happened - the foreign company will receive the cash before domestic one. US cares about getting a modern fab built and done, and apparently TSMC has met the milestones, Intel still has not.

 

[Nyara]

US gov't last week guaranteed $6.6 disbursement to TSMC before December (source), whereas Intel still hasn't received a single penny. Keep dreaming if you think US gov't will fund Intel as priority over TSMC for the sake of "Rah Rah US patriotism". The exact opposite just happened - the foreign company will receive the cash before domestic one. US cares about getting a modern fab built and done, and apparently TSMC has met the milestones, Intel still has not.

No, I just personally think the US will not get new fabs from any for the time being. TSMC is just not interested, but decided to flirt the government until the money was given (to then say they will just do not do it, but not return the money + Taiwanese government literally forbid them for 3nm onward). Intel is just unable in the short-term, too. Samsung and SMIC are restricted, and GlobalFoundries is dying. That is almost all the industry.

The situation will remain so until it just does not remain so, which all depends on the geopolitics happening in Asia, and I do not have a future telling ball to tell you what will happen there.

 

[phead128]

No, I just personally think the US will not get new fabs from any for the time being. TSMC is just not interested, but decided to flirt the government until the money was given (to then say they will just do not do it, but not return the money + Taiwanese government literally forbid them for 3nm onward).

What are you smoking? TSMC's first Arizona fab is set to ramp up production of 4nm chips next month. They hit the milestones to receive $6.6 billion dollars as a result of already establishing 4nm modern fab. So of course US is getting a modern fab, and it already exist. There is no running away with free cash, there are milestone payments for a reason. It's another reason why Intel won't get cash unless it produces results.

Taiwanese government literally forbid them for 3nm onward).

You are misinformed about the actual law. Taiwan gov't laws forbid 1 generation node older than the most advanced node. At this current moment, TSMC is forbidden to export 3nm, but by mid 2025, it can produce 3nm in it's US Arizona fab because N2 will be produced by then, so 1 generation older by then. By late 2026, TSMC will already be on volume production of A16, so N2 will be legally allowed to be produced in US Arizona fab because it will be 1 generation node older by then.

It's a rolling timeline depending on which is the most advanced node, the hard limit is ever shifting depending on the time frame.

The situation will remain so until it just does not remain so, which all depends on the geopolitics happening in Asia, and I do not have a future telling ball to tell you what will happen there.

This is overplayed. If geopolitics was truly a driver, then Intel would not be outsourcing 100% of Lunar Lake 3nm, 100% of Arrow Lake (20A) and 30% of Panther Lake (18A) to "unstable" Asia. The geopolitics angle is just to get taxpayer money, but even politicians are not stupid to give Intel money on the premise of xenophobia and geopolitics alone, you have to produce results, not just scream "China Bad" and expect free money, while outsourcing to Taiwan and laying 15K off at same time. The optics is terrible. This is why despite "geopolitics", Intel hasn't gotten a single penny.