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Background of the Government’s Investment in Intel
In August, the U.S. government announced an investment in Intel through the CHIPS Act, acquiring a 10% non-voting stake in the company. This move aims to support the localization of the U.S. semiconductor industry and reduce reliance on overseas supply chains. As a pillar of the American semiconductor sector, Intel has seen sluggish stock performance in recent years due to missing out on the mobile chip and GPU market booms, with its market capitalization shrinking by nearly 60% from its 2020 peak.
The government’s action is not merely financial support but also a strategic maneuver. Trump emphasized that this investment is not a simple subsidy but rather a low-cost stock purchase designed to protect taxpayer interests. Intel’s shares were trading at around $24, while the government’s purchase price was significantly below market value, demonstrating business acumen in negotiations.
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Market Reaction and Controversy
The market’s response to the government’s investment in Intel was unexpectedly positive, with Intel’s stock rising nearly 8% after the announcement. Investors believe the government’s endorsement reduces Intel’s bankruptcy risk, effectively acting as a "backstop." However, the government’s stake has also sparked controversy. Critics worry it could lead to inefficient resource allocation and even pave the way for future corruption. Historically, government-controlled enterprises in some countries have often been used as political tools, undermining market efficiency. -
Future Direction of Industrial Policy
The Intel investment is just the beginning of the transformation in U.S. industrial policy. In recent years, the U.S. has increased support for key industries, including rare earths, steel, and semiconductors, through the CHIPS Act and the Inflation Reduction Act. The government has explicitly prioritized national security over economic efficiency, a trend likely to expand further in the future to cover more strategic industries. However, government intervention in a market economy requires careful balancing to avoid distorting the competitive landscape.
