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The tech industry was abuzz last week following a meeting between US President Donald Trump and Intel CEO Lip-Bu Tan. The discussion, which took place on Monday, has led to the possibility of a strategic partnership between Intel and the US government.
In March, Tan took the helm at struggling Intel, aiming to steer the company back to success. His leadership has not gone unnoticed, with Trump praising Tan's success and rise. However, the meeting also sparked controversy, as Trump later demanded Tan's resignation.
The demand was made after a Republican senator raised national security concerns over Tan's links to firms in China. Tan, in response, announced layoffs at Intel due to White House tariffs and export restrictions muddying the market.
Despite the demands for his resignation, Tan's statement did not mention any intention to step down. Instead, he indicated that Intel was engaged with the Trump administration to address the concerns raised and ensure officials "have the facts."
The strategic partnership, if it materializes, would see the US government considering acquiring a 10% equity stake in Intel. This move would make the US government the largest shareholder in Intel and represents an unprecedented direct government investment in a major private tech company since the 2008 financial crisis.
The $10.9 billion in CHIPS Act grants allocated to Intel to build semiconductor manufacturing facilities in the US could be converted into equity instead of new funds being injected. Intel has so far received $2.2 billion of this funding, and converting these grants to stock would speed up the disbursement of funds to the company.
This government stake is intended to strengthen domestic chip production and Intel’s comeback in the semiconductor industry amid strong competition and past declines in market share. However, analysts have mixed views. While the government backing under Trump would provide Intel with a powerful “salesman” and might encourage more clients to use Intel’s foundry services, some experts caution that funding alone won’t solve Intel’s underlying business challenges, such as securing enough customers for its manufacturing capacity.
There are concerns that if the government becomes a long-term shareholder, Intel might face constraints in adjusting investments based solely on return on investment criteria, potentially leading to inefficient capital use aligned with broader US industrial policy rather than pure commercial logic.
Trump's cabinet members, including Secretary of Commerce Howard Lutnick and Secretary of Treasury Scott Bessent, were also present at the meeting. After the meeting, Trump described it as "very interesting," and his cabinet members are set to spend time with Tan next week, bringing the president "suggestions."
Intel, one of Silicon Valley's most iconic companies, has been dwarfed by Asian powerhouses TSMC and Samsung in the made-to-order semiconductor business. The company's niche has been chips used in traditional computing processes, which are steadily being eclipsed by the AI revolution.
In a statement, Tan addressed the misinformation circulating about his past roles at Walden International and Cadence Design Systems. He stated that he has always operated within the highest legal and ethical standards.
As the details of this potential partnership unfold, it remains to be seen how this strategic alliance will impact Intel's business model and competitiveness. Intel looks forward to working closely with Trump and his Administration to address the concerns and ensure a robust and prosperous future for the tech giant.
[1] CNBC [2] Bloomberg [3] Reuters [4] The Hill [5] The Verge
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