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Comment by aceon48 | Hacker News Reader

Given the criticality to National security interests, perhaps the US government should have brought the stick with heavy taxes / penalties for not having the US Based plant instead of the carrot of more corporate subsidies.

This is still a US based company, with US leadership

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The US Government could pass a new ruling requiring all chips in all military hardware (or even all hardware used by any government agency) down to the smallest IoT shit needs to be made in the US by a US firm.

I doubt Intel would need any money or other incentive if the orders start coming in.

Good way to force Intel/all remaining chipmakers to move its headquarters to other country.

...and then stop buying military hardware for 5+ years, until these US-made chips are available?

Purchase orders like this happen years out. Before the deliveries dry up, Intel's cash flow will dip and investors will riot until Intel is ready to do business in the US.

The military may not be a large enough customer to make such demands. Or perhaps a handful of companies would do it at 100x the cost of similar civilian products. It would turn into another $10k toilet seat fiasco.

It is highly likely that that was considered but discounted for being suboptimal.

The supply chain for military hardware is already under heavy scrutiny. I don’t think the CHIPS Act is about security; it’s about onshoring production so the US can avoid caring about Taiwan.

This is basically already how it is.

This is also why nobody ever wants to cut the DoD budget, it's basically the backbone of American manufacturing for everything. All the stuff our company makes for the military needs to be US made, despite us being able to get the same stuff from China for 1/10 the cost.

It's also a kick-your-door-down-and-go-prison offense if you try and skirt this. My company knows that first hand (unintentional, but the DoD doesn't care)

Here's the crazy one.

Punishing a company just because it's american.

Alternative take: Punishing a company because it's selling out Americans in favor of cheap labor.

Yeah I'm sure that's going to cause investors/other companies to think that the US is a good place to set up shop and/or make further investments.

I believe that $77B as a fairly good cause for investors/other companies to set up shop and make investment into the US semiconductors market. According to random market statistic site, it is also currently growing by 10% each year.

Is that market so poor that subsidies really is needed on the basis of profitability?

A $77B market that's growing by 10% each year doesn't mean much when the government turns against you demands you do a bunch of expensive investments for nationalist reasons. See also: all the investors fleeing china because they were spooked by the tech crackdown/covid lockdowns. "Punishing a company because it's selling out Americans in favor of cheap labor" is basically the same thing but with a different coat of paint.

This is a myth. Cheap labor is a benefit but not the primary reason companies are manufacturing in the U.S. today.

Look at TSMC. It started setting up US operations years ago and is expecting to complete many years from now.

OTOH they started setting up in Japan about a year or so ago and are already cranking out chips.

I think you meant “aren’t manufacturing” and you are correct. It’s not cheap labor, except for the lowest end manufacturing. It’s that you can’t build anything in America anymore.

The government needs to address that instead of subsidizing one off efforts.

The Japanese plant is less ambitious, using an older process on a smaller scale. The fact the Japanese plant was finished first says little about manufacturing in the US vs Japan.

https://www.bnnbloomberg.ca/tsmc-s-second-fab-in-arizona-del...

TSMC is looking to bail completely on the second fab / even intel is now looking at delaying. The problem we are running into is a lot of DEI language was included in the chips act which is making it hard for TSMC (and Intel) to comply. This is not a good PR move to say this outright so they will just give more generic "labor" shortages etc as the official reason.

> it's selling out Americans in favor of cheap labor.

Perhaps American workers. But an alternate take is that American consumers got cheaper chips and PCs - which resulted in more being sold, more companies and people using them, greater efficiency and new ideas and perhaps a more productive economy.

It will be interesting in 5-10 years if the US needs to tax/block possibly cheaper and better components built outside the US being sold

Intel, like any other succesful company, prices its goods based on what the market will pay, not what it costs to make. Lower costs does not mean lower prices for customers, it means more profits for Intel.

Furthermore, up until at least a few years ago (i don't know how it is now) intel chips were more expensive than amd's, especially on server side, even accounting on performance/watt and intel adopted practices such as locking mobo to just one chipset and things like that. the situation might be different now tho

> Intel, like any other succesful company, prices its goods based on what the market will pay, not what it costs to make

That may be true for Intel's CPUs but when products aren't produced by monopolies, those that have the cheapest costs and are in competition with others, often lower their prices to compete where the competitor can't. For example: AMD, graphics and motherboard parts

Well, I take it that it's always true and is a good lesson for anyone trying to set the price for their own product (like a hacked together side project one of us might be working on :) ).

My understanding is that the price should never be set based on production cost but on the value it brings to the customer. Thereby, a simple program you or I could hack together in a month, might have a cost of 10k in labor only cost, but if it would save the customer millions each year, they would pay a million for it.

So, you set the cost based on how much they are willing to pay, based on how much they would profit/save.

If another competitor offers a similar solution, you just undercut them by 10%, or invest another 10k for superior features.

Intel is a product of Shockley, which was a product of Bell Labs, which was a product of “punishing” AT&T for “being American”.

AT&T would have zealously guarded the transistor patent and never have licenced it out to Motorola, TI, etc. if they only cared about maximising shareholder value.

We're always bending over backwards for a handful of companies instead of promoting a healthy market. We should of created a race with multiple companies to build the best chip factories.

> We should of created a race with multiple companies to build the best chip factories.

That's insanely expensive. Today the only companies that make leading edge chips are TSMC, Samsung, and Intel. Global Foundries (headquartered in US) dropped out a few years ago because it was too expensive. How on earth are you going to fund "a race with multiple companies to build the best chip factories"? It's going to cost multiples of whatever the intel subsidy is.

Multiples of $8 billion? Oh no, where would we find the money? If this is truly a national security issue, perhaps some of the DoD’s ~$150 billion R&D budget could go towards it.

To be fair: to build whole companies would not cost multiples of 8B but multiples of 150B.

And if you really wanted to cover all "critical" industries, even this would be a drop (or maybe a puddle) in the ocean.

Accelerated consolidation was policy for decades. Clinton Admin's dept of defence pushed it really hard, esp for defense contractors. To reduce costs, make our nat'l champions more competitive internationally, make our hair more luxuriant, and cure rickets. Because reasons.

Now the pendullum might finally be swinging back towards pro-competition and healthy open markets.

nit: should of -> should have

How is this adding to conversation?

Wouldn't be easier for the US government to buy Intel shares rather than subsidies it? It should actually be mandatory for the government to own part of a company that is so critical to national and security interest.

And what is the purpose of that ownership?

To coerce otherwise nonprofitable behavior from Intel instead of paying for desired changes?

Shareholders and talent will flee.

There is no point in subsidising profitable behavior.

Your brother's idiot son doesn't get a no show job if you use the stick.

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