Former Intel Directors Call For Trump And Nvidia To Take Chip Giant Private: 'Hope Is Not A Strategy'
News Summary
Four former Intel directors, including former U.S. Trade Representative Charlene Barshefsky and former FCC Chair Reed Hundt, are advocating for Intel Corp. to go private to help it regain competitiveness in the global semiconductor market. They argue that Intel's conglomerate structure is outdated and that separating design and manufacturing units is critical. Their proposal suggests the U.S. government, alongside major tech firms like Microsoft, Apple, Amazon, and Qualcomm, buy out Intel's public shareholders. Post-privatization, Intel's manufacturing arm could be rebuilt into a foundry capable of challenging TSMC, while design businesses for PCs, servers, and autonomous driving (via Mobileye) could be sold or spun out. They estimate the foundry has a book value of $70 billion but requires up to $100 billion in new capital for global competition. This call follows a dramatic 28% surge in Intel's stock price after a partnership announcement on Thursday. Intel CEO Lip-Bu Tan recently described the collaboration with Nvidia as both personal and strategic. Analysts are optimistic about the Intel-Nvidia collaboration, with Bank of America projecting $25-50 billion in long-term annual revenue, while JPMorgan believes more value will accrue to Nvidia. Goldman Sachs views the partnership as a setback for both AMD and Arm Holdings.
Background
Intel, once a dominant leader in both chip design and fabrication, has experienced years of declining performance while rivals like Taiwan Semiconductor Manufacturing Company (TSMC) have surged ahead. The U.S. government, led by Donald Trump, currently holds just under a 10% stake in Intel, with Nvidia owning approximately 5%. Intel CEO Lip-Bu Tan has recently forged a strategic partnership with Nvidia CEO Jensen Huang, aiming to shape the future of AI infrastructure and personal computing. The call for Intel's privatization draws parallels to General Electric's breakup, which unlocked shareholder value, arguing that without government-led restructuring, Intel's recovery in today's market is unrealistic.
In-Depth AI Insights
Are there deeper strategic and geopolitical motivations behind this privatization proposal beyond purely economic considerations? - Yes, the core driving force behind this proposal likely extends beyond merely revitalizing Intel's business competitiveness, serving as a critical component of the Trump administration's "America First" industrial policy and ensuring national semiconductor supply chain security. - Given the U.S. government's nearly 10% stake in Intel and its active promotion of initiatives like the CHIPS Act, a government-orchestrated privatization, breakup, and reconstruction of Intel could effectively bypass public market pressures for short-term earnings, concentrating resources on developing advanced manufacturing capabilities deemed essential for national strategy. - This also represents an attempt to secure U.S. leadership in critical technological sectors amid competition with China, preventing core technology leakage or over-reliance on external supply chains. What are the feasibility and potential challenges of such a large-scale, government-orchestrated privatization and corporate breakup? - In terms of feasibility, the active involvement of the Trump administration and its emphasis on national security could provide significant political impetus and financial backing for the plan. The participation of tech giants like Microsoft and Apple also signals industry demand for supply chain resilience. - However, challenges are immense. First is the valuation and funding scale; acquiring public shares and injecting $100 billion to rebuild a foundry would require colossal capital, with complex sourcing and terms. Second are regulatory hurdles; such a joint government-private sector endeavor could trigger antitrust scrutiny and public concerns about excessive government market intervention. - Furthermore, the operational synergies post-Intel's breakup, talent retention, and the technical and temporal challenges of rebuilding a globally leading foundry should not be underestimated, potentially exceeding the complexity of General Electric's breakup. How might this plan reshape the global semiconductor industry landscape and Intel's long-term competitiveness if implemented? - If successful, this move could foster a globally competitive U.S.-based foundry, supported by the government and domestic tech giants, significantly enhancing America's chip manufacturing capabilities and supply chain resilience, thereby reducing reliance on Asian foundries. - This would exert new competitive pressure on existing foundry giants like TSMC and Samsung, especially in advanced process technology. Concurrently, Intel's divested design businesses, such as Mobileye, could gain greater flexibility and valuation potential. - However, failure could lead to squandered massive investments, further setbacks for Intel's transformation, and a credibility crisis for the U.S. national semiconductor strategy. Success hinges on effectively integrating government, industry, and private capital resources, and achieving breakthrough advancements in technology and operations.