More Intel

Scott Lincicome has a good article in the Washington Post today which states the Intel – U.S. government deal is bad, very bad.

"President Donald Trump’s announcement on Friday that the U.S. government will take a 10 percent stake in long-struggling Intel marks a dangerous turn in American industrial policy. Decades of market-oriented principles have been abandoned in favor of unprecedented government ownership of private enterprise. Sold as a pragmatic and fiscally responsible way to shore up national security, the $8.9 billion equity investment marks a troubling departure from the economic policies that made America prosperous and the world’s undisputed technological leader."

Lincicome is an expert on international trade, and he makes a number of good points, with which I agree. Government involvement in private business almost always ends badly.

Tellingly though he never mentions Taiwan, and he only mentions China in passing. He essentially ignores the national security implications. Those are what is unique about this deal.

Intel is adrift. They don't seem to have a clue what they are doing, and haven't for the last decade. There is a good chance this deal will not work, but it is almost a certainty that Intel will fail without it. They have lost the trust of most of their customers. A government guarantee and funding might help them survive.

Without a chip foundry company of its own, the U.S. will be dependent on foreign companies for the most important products on earth. Given the expertise and huge capital required to start a foundry company, Intel seems to be only option to prevent this from happening.