RPT-BREAKINGVIEWS-Intel fabricates a hopeless trade war predicament

By Jonathan Guilford

NEW YORK, Aug 7 (Reuters Breakingviews) - Intel’s INTC.O position as the last, best, independent hope for U.S. chipmaking is getting shakier. President Donald Trump on Thursday called for “highly conflicted” CEO Lip-Bu Tan to resign after only five months on the job. This administration’s heavy hand with private enterprise is genuinely worrying, but previous ones have intervened at strategically important businesses, too. Here, the company has essentially sealed its own fate.

All semiconductor designers and manufacturers are feeling more pressure. Trump said this week he would impose a 100% tariff on chips, exempting only companies building U.S. capacity. Unlike many whipsawing import duties, there’s at least some continuity here. Under President Barack Obama, regulators began rejecting Chinese acquisitions of chipmakers and Biden’s White House created financial support for the industry while courting other nations to support Intel.

The broad issue is that the $85 billion company’s dominance in the PC era once underpinned U.S. technical superiority. Now, Taiwan Semiconductor Manufacturing 2330.TW, or TSMC, is the supplier of choice for everyone from Apple AAPL.O to Nvidia NVDA.O.

Ceding the crown has cost Intel dearly. Sales and profitability have both tumbled. Its shares are down some 70% from their 2020 peak. With Chinese chipmakers racing to catch up, depending on Taiwan is unacceptable to U.S. policymakers eager to guard against the superpower. The CHIPS Act's $39 billion of subsidies support sought to redress the balance.

Intel keeps struggling, however. Its revised manufacturing process, known as 18A, is sputtering, Reuters reported this week. The company is turning to so much taxpayer support and complicated financing deals that it now reports “net” and “gross” capital expenditures, adjusted for these fillips, a clear sign that its self-determination is slipping.

Trump’s outburst echoes bubbling, albeit murky, concerns about Tan’s links to China. Republican Senator Tom Cotton, for example, flagged the issue to Intel Chairman Frank Yeary, referencing a separate Reuters report about the CEO’s investments in hundreds of Chinese companies. Serious matters should be addressed, but innuendo is an unwelcome destabilizer.

There are precedents for reasonable intervention. When the U.S. government bailed out General Motors GM.N in 2009, the Obama administration ousted CEO Rick Wagoner, the New York Times reported at the time. If Intel was in better shape, it would be in a stronger position to push back. As things stand, however, it largely fabricated this awkward limbo.

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CONTEXT NEWS

President Donald Trump said on August 7 that Intel CEO Lip-Bu Tan is “highly conflicted” and “must resign” from the U.S. chipmaker.

The comments, made in a Truth Social post, follow an August 5 letter from Republican Senator Tom Cotton to Intel Chairman Frank Yeary raising concerns about the CEO’s previous role as boss of Cadence Design Systems, which “pleaded guilty to illegally selling its products to a Chinese military university.”

Tan, whose appointment was announced on March 12, controls “more than 40 Chinese companies and funds as well as minority stakes in over 600 via investment firms he manages or owns,” Reuters reported on April 10.