Lutnick: Why U.S. May Take Equity Stake in Intel
By Rebecca Grant: The U.S. needs its advanced chip makers to counter China in AI. Hence Secretary of Commerce Howard Lutnick is sorting out the situation with Intel. “We should get an equity stake for our money,” Lutnick said on CNBC’s “Squawk on the Street.” “So we’ll deliver the money, which was already committed under the Biden administration. We’ll get equity in return for it.”
Here’s the backstory. Intel received $8 billion, the single largest single grant to a company, under the 2022 CHIPS Act. Now the once-vaunted company is struggling to regain its status as a global force in advanced chips. And its new CEO has been accused of having ties to companies controlled by China’s military.
Malaysia-born CEO Lip-Bu Tan took over in March and faced a hail of criticism. Sen. Tom Cotton wrote that “Tan reportedly controls dozens of Chinese companies and has a stake in hundreds of Chinese advanced-manufacturing and chip firms. At least eight of these companies reportedly have ties to the Chinese People’s Liberation Army.” Tan was CEO of Cadence, a company that on July 28 pled guilty to supplying advanced chip design products to China illegally and will pay a $140 million fine.
Trump called on Tan to resign but has since mended fences after an Oval Office meeting Aug 11.
Given this background and Intel’s important role, an equity stake is a smart solution. Softbank also announced a lifeline $2B equity investment in Intel on Aug. 19. Sen. Bernie Sanders is all in favor of a government stake.
A U.S. stake is a vote of confidence and a national security move. Intel has been on the ropes and was tossed out of the Dow Jones Industrials in late 2024. Intel’s processors dominated from the 1980s to the 2000s. Then in 2007 Intel CEO Paul Otellini turned down Apple’s offer for Intel to supply chips for the iPhone. Next GPUs (Graphics Processing Units) came along and Intel lost the race to Nvidia and AMD. See the timeline here of the GPU race and how Intel lost. See an explanation here from Intel of GPUs vs. CPUs.
A robust mix of processors is essential for generative AI, and strengthening another American company could benefit national security.
“I fully share the President’s commitment to advancing U.S. national and economic security, I appreciate his leadership to advance these priorities, and I’m proud to lead a company that is so central to these goals,” Tan said on Aug. 8.