Late last month, President Trump announced that the US government would be taking a 10 percent stake in Intel. The move makes the US government the single largest shareholder in the company, but more importantly, this represents a seismic shift in American industrial policy.
To finance the acquisition, the administration is converting previously promised CHIPS Act subsidies into an equity purchase of Intel’s common stock. While there were reasons to oppose the final iteration of the CHIPS Act, it had a coherent rationale: Grants and tax incentives could encourage private sector investment while maintaining competitive market forces.
Trump’s conversion of these funds into equity stakes abandons this principle entirely, transforming the federal government from a catalyst for private industry to a direct market participant. A superior strategy would have been to clearly signal that the administration would support restructuring, unlike the Biden Administration, which had put up roadblocks.
According to the Wall Street Journal, the takeover was hashed out over two weeks. It began on August 7 when Trump posted on Truth Social that “The CEO of INTEL is highly CONFLICTED and must resign, immediately.” That post spurred Lip-Bu Tan, the CEO of Intel, and the rest of Intel’s leadership to contact the White House for a meeting. On Monday, August 10, Tan met with Trump, Commerce Secretary Howard Lutnick, and Treasury Secretary Scott Bessent; Tan was then able to convince them that he wasn’t a Chinese spy.
But the standdown came with a price. In return for Trump’s support, the administration proposed taking an equity stake in the company. Soon thereafter, SoftBank Group agreed to invest $2 billion in an effort to curry favor with the administration. Last Friday, the deal was made public.
A critical part of the agreement means that the government will have no board representation or other “governance or information rights.” This means that the government cannot shape major corporate decisions.
Arguably though, Intel has needed better corporate direction. The company missed the mobile revolution twice, wasn’t able to crack into the GPU market that is currently powering AI, and has struggled in standing up advanced technology at its semiconductor manufacturing plants. All of these missteps have put the company in a tough financial position.
Intel is unique in the industry for both designing chips and producing them in factories known as foundries or fabs. In comparison, other large chip companies like AMD, Nvidia, and Apple have partnered with Taiwan’s TSMC to manufacture their chips, following a fabless model where they focus on design while outsourcing production to specialized foundries.
The upside is that Intel isn’t beholden to chip manufacturers in East Asia. But it has come with a cost. Intel has hemorrhaged billions attempting to make its manufacturing operations profitable, losing $13 billion on its foundry business just last year. This struggle reflects a deeper strategic challenge that goes beyond Intel’s corporate performance. As the CHIPS Act’s founding director and chief investment officer recently observed, “Making Intel’s foundry competitive and profitable on U.S. shores should be a national priority.”
While CHIPS was publicly framed around broad supply chain resilience and technological competitiveness, Intel’s unique position as the only major US company domestically operating advanced fabs made its success integral to national security goals. Unlike the fabless giants that rely on overseas production, Intel’s manufacturing capabilities represent America’s most credible path to reducing dependence on foreign foundries, particularly Taiwan’s TSMC, which sits precariously close to an increasingly assertive China.
Intel had viable alternatives that could have addressed its struggles without government ownership. Qualcomm approached Intel to buy it last year. However, the Biden administration’s aggressive antitrust stance, led by Federal Trade Commission Chair Lina Khan, effectively killed this deal before it could materialize. Rather than taking an equity stake, the Trump Administration should have signaled its openness to a restructuring deal. In doing so, the administration could have unlocked private capital solutions while avoiding the precedent of direct government ownership in critical industries.
The Intel deal represents just one example of the Trump Administration’s broader interventionist approach. In another unprecedented arrangement, chip giants Nvidia and AMD have agreed to pay the US government 15 percent of their revenues in exchange for export licenses to China. Treasury Secretary Bessent has also confirmed that the administration is exploring equity stakes in other critical industries beyond semiconductors, signaling a fundamental shift toward direct government participation across multiple sectors of the economy.
The administration’s approach risks creating a system where political considerations increasingly drive economic decisions, potentially undermining the very innovation and efficiency that made American industry competitive in the first place. As the Trump Administration expands this model beyond semiconductors, policymakers must grapple with whether temporary security gains are worth the long-term costs of abandoning market principles that have historically driven American economic success.
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