Donald Trump has claimed that Intel has agreed to grant the U.S. government a 10% stake in the company, a move that has sparked both excitement and concern across the tech and financial sectors. This unprecedented intervention by the White House in corporate America has raised numerous questions about its implications for Intel, the semiconductor industry, and the relationship between the government and private enterprise.

The Proposal and its Details

According to Trump and Commerce Secretary Howard Lutnick, the U.S. government will acquire a 10% stake in Intel. Lutnick announced the deal on X, expressing that it was "fair to Intel and fair to the American People". While the specifics were initially vague, it has since been revealed that the government will purchase 433.3 million shares of Intel common stock at a discounted price of $20.47 per share, giving the U.S. government a 9.9% stake in the company. The $8.9 billion investment will be funded using $5.7 billion in unpaid grants previously awarded to Intel under the U.S. CHIPS and Science Act, along with $3.2 billion from the Secure Enclave program. The closing date is scheduled for August 26th, or soon after.

Trump stated that Intel CEO Lip-Bu Tan essentially "gave us $10bn for the United States" during a meeting where Trump had initially demanded Tan's resignation over his ties to Chinese firms. Trump also posted on Truth Social, stating that the United States "paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars".

Intel has stated that the government's investment will be a passive one, without voting or governance power. The government has agreed to vote in line with Intel's board on shareholder matters, with limited exceptions. However, Intel also warned in a regulatory filing that the move could lower its chances of winning future awards from the government and harm its international sales.

Implications and Potential Benefits

The deal is seen by some as a strategic move to bolster domestic semiconductor manufacturing. The U.S. government is aiming to revitalize the American chip industry and reduce reliance on foreign manufacturers. The investment could provide Intel with the financial backing needed to expand its manufacturing capabilities and compete with industry leaders like Taiwan Semiconductor Manufacturing Company (TSMC).

Intel's customers, including Microsoft, Dell, HP, and Amazon Web Services, have voiced support for the deal, expressing anticipation for a new generation of American-made products. Furthermore, the government will receive a five-year warrant if Intel ceases to own at least 51% of its foundry business. The warrant is valued at $20 per share for an additional 5% of Intel's common shares.

Concerns and Criticisms

Despite the potential benefits, the deal has raised concerns about government intervention in the private sector and the potential risks for Intel. Some analysts worry that Trump's actions could create new categories of corporate risk. Intel itself has acknowledged that the U.S. government becoming a significant stockholder could impact its non-U.S. business, as the company may be subject to additional regulations or restrictions, such as foreign subsidy laws in other countries. 76% of Intel's revenue came from sales outside the U.S. last year, with 29% coming from China.

There are also concerns about whether other governmental entities will attempt to convert existing grants into equity investments or be unwilling to support future grants. The dilutive effect on pre-existing shareholders and the possibility of the government "clawing back" funds that were already pledged have also been noted.

A Shift in Strategy?

This move signifies a possible shift in the government's approach to funding the semiconductor industry, potentially heralding an era where the U.S. is not just offering grants, but buying equity. Trump has indicated his desire to make similar deals with other companies, stating, "I will make deals like that for our Country all day long". However, some analysts caution that such arrangements might be less appealing to companies in a more stable financial position. The Trump administration has stated it will not seek equity in other CHIPS Act recipients like TSMC.