U.S. President Trump recently appeared at the White House wearing a red baseball cap reading "Trump Was Right About Everything," with a slightly pursed mouth and a proud expression, announcing that the U.S. government had acquired a 9.9% stake in Intel through an $8.9 billion investment. He touted this as a "win-win" deal that would both consolidate America's leadership position in the global chip industry and make "this great American company" more brilliant in the future.

However, Reuters reported on August 23 that analysts say the funding is still insufficient for Intel's chip manufacturing business to achieve real prosperity. What Intel urgently needs is for customers to adopt its promoted most advanced 14A process, but achieving this in the short term is quite difficult.

On August 22 local time, Trump announced that the U.S. government had acquired a 9.9% stake in Intel.

**Few Major Customers, Low Yield Rates**

Intel CEO Michelle Johnston Holthaus, who took office in March this year, warned last month that if the company cannot secure major customers, it may have to exit the chip foundry business. She stated, "Looking ahead, our investment in Intel 14A will be based on confirmed customer commitments."

Summit Insights analyst Kinngai Chan pointed out the economic logic behind Holthaus's statement: Intel must ensure sufficient customer order volume to produce 18A and 14A process nodes, making the foundry division economically viable.

"We believe that if they cannot secure enough customers, any government investment will not change the fate of their foundry business," Chan said.

This company, which once represented America's chip manufacturing prowess, has seen its manufacturing business and artificial intelligence (AI) chips gradually fall behind due to years of management mistakes. Now, the deadlocked Intel urgently needs to prove its advanced chip manufacturing capabilities to attract customers.

The report noted that Intel's 18A process is facing yield issues, with a low proportion of produced chips being usable for customers. Large chip manufacturers including TSMC typically absorb the costs of low yields themselves to maintain major customers like Apple, but for Intel, which has reported net losses for six consecutive quarters, it's very difficult to bear such costs while ensuring profitability.

Gabelli Funds analyst Ryuta Makino said that if yields are poor, new customers won't use Intel foundry services, failing to solve the company's technical problems. He believes Intel can eventually achieve optimal yields, but compared to the funding promised to Intel by the previous Biden administration through the CHIPS and Science Act, the Trump administration's investment has an overall negative impact on the company because "this is not free money."

**Once a Household Name**

Intel was founded in 1968 by semiconductor pioneers Robert Noyce and Gordon Moore, who had previously worked for Fairchild Semiconductor. It pioneered memory chips for storing short-term data and later invented microprocessor chips.

In the 1970s, enthusiasts and businesses widely used Intel's 8080 microprocessor to assemble early personal computers, with sales far exceeding competing chips. Intel later successfully marketed to IBM, getting its chips used in personal computer products.

In 1985, Microsoft also built its Windows operating system on Intel processors, creating the "Wintel era." Both companies' profits soared, becoming among the world's most valuable companies by the mid-1990s. Most of the world's computers soon bore "Intel Inside" labels, making Intel a household name.

However, by 2009, the Obama administration became very concerned about Intel's monopolistic position in the computer chip market and filed an antitrust lawsuit. Although both sides reached a settlement the following year with little impact on Intel's profits, hidden concerns began to emerge.

Paul Otellini, Intel's CEO from 2005 to 2013, refused to manufacture chips for Apple's first iPhone, considering Apple's offer too low. Otellini later admitted this was a mistake, saying "if we had done that, the world would be very different."

His successor Brian Krzanich tried to compensate for the missed mobile business by investing billions of dollars to manufacture modem chips for iPhones, but the company failed to develop this technology and eventually sold it to Apple.

Intel subsequently often launched new projects, most of which were shut down due to management losing patience or technology not meeting expectations. For example, Intel also tried to develop the GPU chips that made NVIDIA successful, but its developed GPUs didn't achieve expected results and were abandoned halfway. Multiple decision-making errors caused Intel to gradually fall behind TSMC and Samsung in semiconductor manufacturing from 2015 to 2019, with declining technology and market share.

In 2021, Intel invited former executive Pat Gelsinger to return and help the company achieve profitability. To this end, he formulated an ambitious plan to launch five new production processes within four years to regain leadership, and lobbied the Biden administration to provide subsidies for the company. Gelsinger also promised to invest over $100 billion to build new chip manufacturing facilities in Arizona, Oregon, New Mexico, and Ohio, but some of these facilities have been repeatedly delayed due to Intel's financial difficulties.

While Intel focused on manufacturing, AI demand surged from 2022 to 2023, with AI companies and cloud computing companies flocking to Intel's competitor NVIDIA, which dominates the GPU field, using its developed graphics processors. Intel's sales declined while manufacturing and hiring costs rose.

Subsequently, Gelsinger resigned, and Holthaus took over, implementing sweeping reforms, layoffs, new AI strategies, and customer acquisition plans.

**"Not a Free Lunch"**

Just as Intel was moving toward a new direction, Trump demanded Holthaus's immediate resignation several weeks ago, citing so-called "relations with China." Holthaus made an emergency visit to the White House on August 11 to meet Trump, and on August 12, Bloomberg reported that the Trump administration was negotiating with Intel about government equity participation to help expand its domestic manufacturing business. On August 22, Trump formally announced the U.S. government's acquisition of a 9.9% stake in Intel.

According to Intel's statement released the same day, the U.S. government purchased 433.3 million common shares at $20.47 per share, with a total investment of approximately $8.9 billion, corresponding to 9.9% equity. The government's acquisition funding comes from $5.7 billion in subsidies previously awarded to Intel under the CHIPS and Science Act but not yet paid, plus another $3.2 billion from government assistance programs. Combined with the $2.2 billion in subsidies Intel has received to date, the U.S. government's total investment in the company reaches $11.1 billion.

Intel stated that the U.S. government will not occupy seats on the company's board of directors and has agreed to vote consistently with the board on matters requiring shareholder votes, but the voting agreement has "limited exceptions," and the stock purchase price was below the market price at the time. Additionally, the U.S. government will receive five-year warrants at $20 per share, potentially acquiring an additional 5% of the company, which can be exercised if Intel no longer owns at least 51% of its foundry business.

The market reacted positively, with Intel's stock price rising 7% on August 22. Some analysts believe the U.S. government's support could help with Intel's promised but unbuilt facilities. Peter Tuz, president of Chase Investment Advisors, said: "Getting capital support and having a new shareholder who wants to see you succeed are both important."

CreditSights senior analyst Andy Li said, "On one hand, government equity participation can be seen as a strong signal that Intel is 'too big to fail'; on the other hand, there are concerns this could bring potential governance issues and its impact on the company's ability to act in shareholders' best interests," and Intel actually hasn't received additional funding, "suggesting the U.S. government's willingness to provide support has slightly weakened."

This deal may still need approval from Intel's board of directors. If the final transaction succeeds, this would be one of the largest U.S. government interventions in a domestic private company since "rescuing" the automotive industry after the 2008 financial crisis.

Multiple foreign media outlets described this deal as "unusual." NBC noted that although the U.S. government held temporary equity in crisis-hit core companies through bailouts during the 2008 global financial crisis, this acquisition of Intel equity is quite rare because the current U.S. economy is not in crisis.

The U.S. Congress released a research report in 2003 analyzing the impact of federal government direct equity holdings in publicly traded companies. The conclusion was that such practices are "not a free lunch," and despite potential profit opportunities, they also expose taxpayers to "greater risks."

NBC noted that after requiring NVIDIA and Advanced Micro Devices to "tribute" 15% of their chip sales revenue in China to the U.S. government in exchange for export licenses, "Trump continues to break long-standing conventions of government-business interaction, departing from the free market spirit that has long been mainstream in both major U.S. political parties."

At the August 22 press conference, Trump stated that the U.S. government would promote more such deals in the future.