Introduction to US Government Intervention
The White House has confirmed that the Trump administration is in conversations with Intel about the acquisition of up to 10% in the chip maker. This move is part of the president’s plan to put the needs of America first, both from a national security and economic point of view. The US government’s involvement in such a large company would be unusual, but it aligns with President Donald Trump’s trend of intervening in the free market.
Recent Examples of Government Intervention
Recently, chip makers Nvidia and AMD agreed to pay the US government around 15% of their sales in China. Another example is the sale of US steel to Japan’s Nippon Steel, which gave the US government a "golden share" and the right to appoint a board member. Last month, it was announced that the US government would become the largest shareholder in the only operational mine of US rare earths, belonging to MP Materials.
More Than One Company?
The Trump administration’s approach to intervening in the private sector is seen as unusual and different from other administrations. Geoffrey Gertz, Senior Fellow in the Center for A New American Security, describes the latest movements as "unusual" and notes that they cut off unique offers with individual companies. This approach is different from specified industrial standards or guidelines for industrial politics.
The Meaning of Chips
Both the Biden and Trump administrations have shared the goal of improving the US ability to build advanced chips for various aspects of the modern high-tech industry. The Chips Act, introduced in 2022, received non-partisan support and provided federal aid and grants for companies like Intel, Taiwan Semiconductor Manufacturing Corporation (TSMC), and Samsung to increase production in the US. Intel is the most obvious choice for production in the USA, but the company has faced problems in recent years, including sluggish income and a fallen share price.
Crony Capitalism or Intelligent Industrial Policy?
The potential deal between the US government and Intel has raised concerns about crony capitalism. Geoffrey Gertz notes that there is a risk of undermining competition and long-term innovations by having preferred companies that can be lazy due to state protection. However, Sujai Shivakumar argues that the key is to reconcile real strategic concerns and market forces, and that an intelligent industrial policy can help companies restore trust among customers, investors, and suppliers. The US Minister of Commerce, Howard Lutnick, is negotiating on behalf of the US government and has stated that the US should "benefit" from this agreement.
