You could see this happen in real-time as Intel sold essentially the same processor between 2015 and 2020 stuck on 14nm while increasing prices and lowering quality -- replacing solder with thermal paste, sticking with 4 cores as long as possible to maximize $.
Those 2015 processors were some damn good processors though - at that point they were quite far ahead. I haven't counted Intel out of the game just yet like many here seem to - they have definitely hit a stumble though for sure.
It's a risky bet to say intel is going to recover imho. A lot of good engineering talents have left intel. I dunno if they are capable of rehiring back those people. I suppose the new CEO is going to help.
Not many companies recover like this. Microsoft is one notable exception - and they recovered because they have a huge cash cow, and that gives them a tonne of runway.
The 12000 series has already bought intel a lot of breathing room. It's outperforming AMD on gaming workloads at a lower price point, AMD have recognized this and lowered their prices.
AMD also recovered because they couldn't be killed, as Intel was never going to be allowed becoming a single source for x86. I.e. the US military said: We need more than one company doing the processors we need. Not sure if the same is true for Intel today. There are multiple providers for sufficiently powerful processors and from an enduser perspective the actual architecture doesn't matter much. I.e. it's far simpler to repurpose any other source today than it was 20 years ago.
Nokia also recovered, not only they own UNIX birthplace, the Android phones using their branding are actually the few Android ones that get proper updates.
However hiring Elop, with the contract bonus clause to sell Nokia Mobile, was a really dumb move.
Replacing solder with thermal paste? Thermal paste has always been the preferred conductor between CPUs and heatsinks. Since 486DX2 days. Unless I'm mistaken, what do you mean?
> Intel has also long preached the perils of solder TIM, which can lead to shorter lifespans due to microcracks in the solder TIM that form during heat-induced expansion and contraction.
It's not just about "cheaper solution". Yes, solder will be best for an overclock but that's not the primary objective here.
There is a metal heatspreader on top of the actual CPU which interfaces with the heatsink/fan the user installs. During the time, Intel made a change from soldering the heatspreader to the CPU to using thermal paste between the heatspreader and CPU, which decreased performance and led to users “delidding” their CPUs to increase thermal transfer and, as a result, cooling performance.
I worked alongside this team. Without going into too much details, PTIM vs STIM are primarily cost driven. Engineers are not stupid, which is what Linus, et. al. claim. In fact, they know and listen to what Linus has to say about shitty PTIM. I would love to tell you everything that goes into selection of TIM but for obvious reasons, I cannot. You'd be surprised the amount of engineering that is behind something as simple as thermal interface material.
As they say, good engineering is about optimal tradeoff between every aspect of your product. That includes cost (directly, we are responsible for it) and customer happiness (indirectly, since in a giant company, that gets handed off to the Marketing/PR team). These can get out of sync.
I was there when it hummed, and I was there when it failed. This is a gross mischaracterization (of an extremely complex failure) that owes its appeal to a simple and familiar explanation: greed / optimizing for shareholder returns.
I'd love to dish, but there is no simple and salacious story to tell, and it's too soon to talk about it anyway as far as I am concerned (and I imagine their lawyers agree). I do think the emergence of high-margin software companies as providers of mostly high-pay, low-stress jobs (and thus magnets for sharp and motivated engineers or aspiring engineers) was one of many contributing factors. I'd tell you how process engineers in the most critical areas used to work, but you'd never believe me.
> I do think the emergence of high-margin software companies as providers of mostly high-pay, low-stress jobs (and thus magnets for sharp and motivated engineers or aspiring engineers) was one of many contributing factors
Are you implying Intel's margins weren't high enough for it to compensate its engineers well or provide better working conditions?
I didn't mean to imply that exactly (since the margins were still pretty high and comp was still incredible by conventional standards), but I'm implying that high-margin software companies could easily offer previously unthinkable comp so they could recruit the best talent possible. I think most HW companies were slow to adjust across-the-board comp to compete. It's not like there was a mass exodus to these SW companies, but I think it was a small factor in this story (and was for nearly every tech company that wasn't operating at absurd $/employee margins).
Even if you ignore the software world which has been easily outpacing hardware compensation for the last decade, if you only look at hardware companies, Intel has been either at or very close to the bottom of the pay scale until very recently. In the industry it became a bit of a joke where ex-Intel employees would joke by comparing their pay raises upon resigning.
Intel was very clear that it was not willing to pay top dollar not because they didn’t have the money, but because top technical talent tended to resist or reject Intel culture. This meant the big bucks always went to management and other enforcers of said culture.
In 2021 Pat Gelsinger told HR to increase pay to match market in an attempt to stanch the attrition. The problem with this is that Intel management didn’t try to fix the broken culture, and instead propped it up by handing the new cash over to the “critical talent” that again, were the cultural enforcers. Pat G genuinely believes Intel is the greatest company on the planet, so he won’t see this as a problem.
Selecting desktop processors over mobile processors as strategy. Basically a double-down on what had always worked rather than paying attention to the signs of the market.
We've all heard the story of Steve Jobs asking for a mobile processors for the iPhone and being shutdown by Intel management. I knew a number of Intel engineers and managers who were pushing the mobile path in 2009-2011 even after the iPhone showed that mobile was the money maker. When push came to shove, those Intel engineers got shutdown hard and most of them left Intel. When the evidence in your face is ignored and all you hear is "stupidity" - the non-masochists get out!
I used to work for Intel so seeing it collapse like this roll out as a slow-motion tragedy has been sad. But that's also been true (for many of the same stupid management/strategy reasons) of Hewlett-Packard for whom I worked for 10 years when Bill and Dave were still alive. Leadership matters. Probably more than anything else, even technology know-how.
Yeah agreed. I was there through the high point, through when the company committed suicide and finally resigned when the corpse started to stink publicly. Blaming everything on the bean-counters is entirely misleading.
One of these days the demise of Intel will be taught in business schools as a case study of how to destroy a tech company from within.
I made it sound too interesting. I just meant to point out two things that are pretty obvious to external observers (one of which is that manufacturing work is often less predictable and more after-hours than something like SW development).
Given the stories I've heard, I don't think anyone can compete with the gaming industry!
Even when no one is being abused you have people who pour their lives into a game, knowing that they have a deadline. What they get into a particular game by a deadline can effectively define their career. Its not just a lot of pressure, its a lot of pressure with a lot of passion and a lot of visibility.
It seems both Intel and Boeing had similar paths. They were engineering-first companies that were transformed into profit seeking and while they made a lot of money initially, eventually it failed for both of them.
My takeaway is that working hard to build quality products is more likely to be profitable than working hard to make money.
Part of the cause is that the people doing this still benefited - if you can cut a bunch of costs and bump profits for the next few years it doesn't matter to you as an executive whether those changes ultimately lead to significantly worse outcomes for the company in the longer term.
Brand loyalty takes a while to fade, there seems to be a cycle with a large number of successful companies that goes
work honestly to build a good product
-> generate brand loyalty
-> people with integrity get replaced by people who would have had no chance of building that successful product/company in the first place
-> cut as many corners as possible while riding the brand loyalty to more short term profits
-> eventually, on the scale of decades sometimes (because people take a /long/ time to realize that 'well known brand' !== quality), get out-competed by a small company building the same thing as you with integrity
I saw an interview with an old finance guy some years ago talking about this, he was saying in the past you'd work for a company and spend your career there, you'd get shares somehow (through partnerships or some other mechanism, but you can't sell them) and as the years go by the value of your shares increases and you get more and more, so its in your self interest to keep the company going.
Now it's in the interest of a CEO to take a performing company carve out the middle so profits go up in the short term, shareholders get more money, he gets fat bonuses and the company dies.
Though there were problems with the old style too - they became very conservative and couldn't adapt among other things.
Why would the board care about the 10 year health of a public traded company, If that same board could profit on the short term gains and get out before it tanks?
When the board members taking their gains and re-investing them in other companies to then repeat this strategy.
One possible solution: weight shareholder votes by how long they're willing to lock up their shares.
There's still an agency problem between the shareholders and board members, but at least the shareholder votes will be weighted for the long haul. Locked shares would have to be held in a way that prevents wrapping them in a salable derivative.
This is a good idea along with progressively decreasing taxes based on how long you hold the shares. They could go down every year all the way to 5% at 10 years.
This would have a significant impact on encouraging long-term investing for investors and long-term planning for companies.
This should apply only to shares in individual companies and not index funds or mutual funds.
It would also encourage a shift away from short-term speculation and to long-term investing in great companies.
> This is a good idea along with progressively decreasing taxes based on how long you hold the shares. They could go down every year all the way to 5% at 10 years.
Where I live stocks profits are taxed at 20% at first, then 5% less for each 5 years you hold them, down to 0 taxation after 20 years.
The bigger problem with taxes is that companies are not paying their fair share of taxes in the countries where they generate revenue and profits.
Also, this kind of progressive tax reduction should only apply after the company is public. So the clock for VCs, founders, etc only starts at the time of the IPO.
This would ensure all the early stakeholders are also aligned in investing in the long-term success of the business.
Currently, these early stakeholders are more likely to be focused on cashing out and having a liquidity event.
Consumption taxes hit poor people harder than rich people. Inheritance might work, and carbon emissions might also work if you have a tax-and-rebate system so that poor people can still afford stuff.
Consumption taxes can give rebates just like carbon taxes. A somewhat popular national sales tax proposal a few years back would have done it that way.
I think the solution is in reforming capital gains taxes. You should only get the discount on taxes if you hold for 5+ years. And even then, the brackets should be more progressive for extreme (e.g. hundreds of millions) in income.
Overall, these two changes would incentivize holding stocks <1 year more often than people do currently.
Perhaps you could get a longer-term effect if you had another, lower tax level at 5+ years, or raised moderately the 1+ year cap gains rate and moved the current one to 5 years.
Why not just treat all stock investment like 401k’s: taxed as income when selling, tax deductible when buying? The deferred income tax still provides an incentive to invest, yet you don’t get a tax break when selling (unless you happen to be in a lower tax bracket between then and and when you sell).
There are severe market stability issues associated with people gravitating towards <1 year holdings. The cap gains rate exists partially to encourage long-ish holdings.
With that incentive severely reduced as your plan proposes, you’ll see much Miles’s incentive to hold and more volatile markets.
I doubt there is anything specific about an exact one year holding cutoff, but I'd love to see a source. If anything, the fact that we're having this conversation suggests the long term investment theory has been demonstrated to be either false or uncalibrated as it exists now. I'd also be open to a graduated rate (almost like a vesting schedule) of discounts starting at 1-2 years and ending at 5 years. But do we really need more complexity? Just have it be 5 years and public companies can be long-term focused once again. Markets will survive -- day traders tend to lose money and drop out.
How would investors tell the difference between executives that are actually optimizing for ten year health, vs. executives who are floundering and using fake long-termism as an excuse to delay accountability? Ten years is a long time to wait to find out if a strategy works or not.
Boards often want the same thing because members usually own stock in the company. Make a lot of money in the short term, pump that into stock buybacks, profit. Shareholders want the same thing - they often aren't looking past the next 1-4 quarters, they want fast returns.
I'm not convinced this is even a problem that needs to be solved.
If companies inevitable self-destruct from short-term management, that creates space for new companies to emerge with new approaches. Sure, there will be some noise/churn but overall I think it makes the overall ecosystem stronger.
Creative destruction is important, but some businesses are easier to replace than others. How do you create another Intel or Boeing? The start up costs are insane. Even beyond that, there's value in some institutions.
I mean if we really need leading-edge aerospace or semiconductors protected from the vicissitudes of the market, the government getting more directly involved seems like the obvious answer.
It's not really a solvable problem IMO. Big corporations and humans have different lifespans, so trying to tie together their fates is kind of fools errand. Intel's success has a time horizon of decades. The only person willing to sacrifice that kind of time for a company to see things through is the founder, because it's more sentimentality than achievement or profit seeking.
If Intel's business requires a time horizon of decades and its owners time horizon is a couple years isn't that a problem? I'd propose some portion of a leader's comp should stay in company stock for 10 years even if they leave after 3. That will incentivize them to make good capital investments and train the next generation of leaders.
What do you mean "we"? Like government intervention? These are private companies, if they don't want to change this aspect, there's not a lot you can do aside from getting on the board...
I think it's great that companies particularly large incumbents tend to decay and fall after a time. It promotes renewal and evolution, like the cycle of life and death. It's a bit sentimental to want a company to survive decades.
It would be much worse if the big incumbents all remained at the top and dug themselves into the regulators and politicians and crowded out others (they already do to a great extent but it could be a lot worse).
People in 1900, as consumers, thought they'd need a reliable supply of horse feed for the rest of their lives too.
Uncertainty and risk are big reasons why people fear change, I completely understand. I'm not saying the feeling or desire for stable incumbents is invalid, although maybe my comment could have been worded a bit better.
Governments place a lot of rules on corporate governance already. Maybe a new one is called for. Maybe a social movement that pushes index funds to exercise the voting shares they hold. I'm open to ideas.
The real defense against this dynamic is the takeover bid. If you think the existing board and CEO are doing a poor job of running the company by neglecting growth opportunities, you can literally buy out the existing shareholders' position and be in charge. If you're right, you'll reap the gain in the form of increased valuation for the shares you bought.
That only works if the market recognizes the long-term impact of financialization and prices the company accordingly. Otherwise you'll be paying more than the company is actually worth. By the time it becomes obvious that the company was overpriced it's too late. Whatever actual value might have been there back in the day has already been destroyed.
I've been successful enough, but glancing at my bank account it doesn't look like i can literally buy 51% of any company I've heard of. Have you done it? Or can you help point me to someone like myself who has? If 'you' meant "Private Equity Firms that specialize in hostile leveraged buyouts", are they numerous enough to squeeze inefficiency out of the Fortune 500?
Forgive me if this sounds foolish, I don't know how this stuff works. Could it be possible to somehow write something like this as a requirement into the corporate charter or articles of incorporation such that if these terms were violated the company would have to be dissolved (or some other equivalent nuclear option)? Has there ever been anything like this e.g. 'if company ever stop selling x, it has to close down'?
There's reasons why that doesn't happen to this kind of company
- short term-ism leads to great financial results in the short term so the stock price goes up making a buy out expensive. Anyone that can see the internal issues will know it's not worth that price.
- very few groups can make an offer on companies as large as Intel and Boeing. Those groups are not known for deep engineering expertise.
- companies use poison pills and other measures to prevent take overs
But stock prices are ruled by long-term dynamics not short-term ones. That's how firms like Amazon can see their stock prices rise even well before posting any profit.
Stock compensated C-suite can get shares on start, juke the stats for four years to vest, stock is well-up, cash out for juicy comp, buy a new boat, stay a few years more if wanted, exercise more shares/options for cap-gains taxed new money, buy second home, quit and watch the company crumble over a few years from comfort.
How many folks out there got burned by HP products when they were hip-deep in that step 3 step 4 zone of "strip-mine your own brand reputation selling cheap crap"?
HP was legendary in electronic test equipment and early computers, calculators etc. Look on Ebay for HP branded power supplies or multimeters, for instance, and you'll see that they still command very high prices. And it's not collectors buying them AFAIK, it's mostly people using them-- even 30 or 40 year old gear. They spun off the test equipment division as Agilent (which still exists and is highly respected under then name Keysight) around the time their computing division started to go downhill.
This is all true. I always hated their deskjet printers, though. The First one I had was a Deskjet 500 and that thing was a massive turd with very expensive ink cartridges, and no matter how many times I cleaned the rollers, it'd still have issues not being able to feed paper. Shit design.
I had a 600 something C that was pretty decent, and my wife had a 720C that we abandoned because drivers got too fussy around Windows 8.1ish (the 64-bit driver in windows update didn't work, but if you got the driver from 64-bit xp, it would work). The color had stopped working, but not bad for 15+ years of service.
Those things are tanks. Perform a maintenance kit on one of those, and it's good for another 150k pages no problem. The main thing that needs attention is the rubber feet that pick up the paper get dry. Some rubber rejuvenator on a q-tip goes a long way.
I have a 4050 for home, and I have no reason to doubt its future longevity. :-)
The firmware, though, is ancient (telnet, and a web interface that requires IE 5 IIRC). Now if there was open source firmware for these things...
I think it's more printer _software_ that sucks. But we have three LaserJet M553 printers that have functioned perfectly. I think that model only recently went out of production and can still be found on the shelf.
I have a sharp mx c301w color laser printer at the office and it's frankly just great. Scanning, printing and whatever just work.
At home I have an Epson ET-M3170, it's not a laser but one of those epson thing where you don't have cartride but just empty bottles of ink into a tank when it's empty, and it works great too (it's much slower, but then again it's a lot cheaper).
It's mostly inkjet printers that are always terrible.
Before the 2000s or the Agilent spin-off, HP was the undisputed king in electronics test equipments. Their flagship multimeter HP3458a, launched more than 30 years ago, is still the standard in metrology. And Keysight (spin-off from Agilent) is still making them with little to no significant modifications over the years.
Heh, back in the day they made the best calculators, test equipment, disk drives, workstations (early PA-risc snakes), etc. Even their printers were a unique technology using an HP print engine that was wonderfully durable.
Then they killed off the calc division, not because it wasn't profitable, but because it wasn't as profitable as ink. Years later they decided to upgrade the calculator (TI had won the market in the meantime), instead of doing something innovative they bought a new arm chip and ran an emulator of the old chip and used the old software stack with minimum polish under the emulator. Not surprisingly Texas Instruments laughed all the way to the bank.
Their laser printers were starved as well, again not as profitable as selling ink for ink jets. So the print engine was killed off and now uses the same print engine that you get in a Dell printer. Which was sad, they weren't nearly as durable.
I have an opening price point Brother laser printer from about 2002 whose drum is on its last toner cartridge worth of wear. I’ve only used it lightly since I stopped contracting about fifteen years ago though.
I don’t feel burned honestly..
A HP printer that I have is probably 8 years old, another one is about 20 years old and they are both still working as expected. (The 20 years old now feels slower than my grandmother drawing, but it was expected at the time)
Correct, it’s effectively the moral hazard problem. Where executives capture the upside (of short term gains in stock) and pass on the risk to future execs/shareholders.
Very difficult to align long term incentives unfortunately, unless the company is founder led.
Yes. Some big old companies have been family-owned for generations. You may be much more intent on keeping brand quality if you envision your grand-children prospering off it.
You know, normally I agree with you. But I looked it up, and Intel has only barely tripled revenue in the last 20 years. Their stock price has followed almost exactly this increase in revenue.
These are not what I would call super gains, they are definitely good gains, but they are what anyone would expect from a blue chip company like Intel.
So the point is this isn't people looking at the short term, this is a company that used a strategy to optimize growth over a 20 year period. Yes they hampered future growth after those 20 years, but this is a technology company, most technology companies don't even exist after 20 years. I don't think there is really any policy or attitude or anything at all you can implement to get people to maximize revenue over a longer period than 20 years, especially in a technology company. No one would invest in such a company because, because such an investment would be extremely risky.
It's a microcosm of the deindustrialization of the US as a whole. A manufacturing and export powerhouse, which financialized by outsourcing production to save on labor & currency arbitrage, accruing profits to multi-national corporations and wall street while the productive capacity within the nation was hollowed out, and labor wages stagnated.
Over time lack of domestic supply chain becomes and security and economic stability problem, and domestic inflation rises after trade deficits grow too large, and various supply shocks occur etc.
My understanding is that both Boeing and Intel have received significant subsidies and bailouts from the federal government when it became apparent the companies had issues. So I'd argue that this an indication of a management success, not a failure. They've been able to externalize some of their costs to the federal government, thus increasing their profits.
It is a success, but merely a short term success. Boeing, Intel, GM, and GE went from being blue chips suitable as buy-and-hold for a retirement account to being simply high priced penny stocks.
On paper Intel is still a very solid company in a dominant market position (albeit that market is not necessarily a growing one). It still has great margins and 6-7x higher net income compared to AMD. And has arguably caught up with AMDs CPUs this year. Despite that it’s market cap is almost the same as AMD’s. So if you believe Intel can successfully reform itself (maybe not an easy sell, but not totally inconceivable they have all the tools they need for that) it’s a great stock which is criminally undervalued.
> And has arguably caught up with AMDs CPUs this year.
AMD is not the competitor they need to worry about.
The future will belong to manufacturers that can produce powerful CPUs that power a device for a day on a single charge, without needing fans for cooling (like what we see with the ARM-based M1 from Apple).
Low power/reduced heating costs will also be a big draw for cloud providers.
If Intel can't compete there they'll be in trouble.
Saying that Intel caught up to AMD is like saying Ford is saved because they won Le Mans. Come back to me when Intel can achieve M1 performance with the same power enveloppe.
M1 is not an x86 competitor, it's a laptop manufacturer competitor for the likes of Dell, Lenovo, ... I'll never buy a M1 CPU for my desktop because they wont sell me one to put in a rig I build.
Intel is undergoing a change in what shareholders it attracts as well.
It did catch up with AMD with Alder Lake, but it is also committed to very large R&D capital expenditures.
So anyone holding it hoping for higher dividends and more buybacks is dumping, which is pretty much everyone that bought it before Pat Gelsinger took over.
If they stay focused on the path they are on, they will turn it around. Anyone buying in now should be prepared to hold until 2025.
How did Intel catch up? Their CPUs might deliver similar performance but they are way less efficient than AMD and Apple if we can count them as a third player. The next few years will tell if Intel's foundries can catch up with TSMC.
They used to be losing out on both performance and efficiency. Now they are up to par at least on one of those.
For foundry to be successful, they need one of the big clients - Apple, Qualcomm, Mediatek etc. If they find one of them, they'll pay for the fabs getting up to speed.
It's brilliant building up the gpu segment alongside. They are building internal demand, so they can be their own "trailbrazer" client for foundry.
Is Apple really a competitor so? Both AMD and Intel are selling to third parties and have access to the huge market of Windows powered machines. Apple is using the M1 exclusively in-house.
This is true. Valuation is key. If you could buy a barely-profitable shitty business for a dollar, it’d be a great deal. On the other hand, an amazing business like Apple is not worth buying if it costs you the Earth.
whoah, AMD has same marketcap as Intel ?
They were worth 2B 4 years ago, now 180B...
Feels like they're massively overvalued rather than Intel being undervalued
They came up with a mobile chipset that has a GPU that isn't completely useless. That's worth at least $100B. My Ryzen 5 4500U+Vega 6 was close to the bottom end of the new chipset when it was new, and it does everything I ask of it whether that's a spicy Ableton Live project or an hour of Tunic.
In a world where TSLA's (P/E 177) market cap is 15 times that of GM (P/E 6), despite GM selling 6 times more cars, I'm not sure that I'd piss on GM as the 'overpriced penny stock'.
There are supply chains disruptions. Some car manufacturers have been heavily affected by them. Some have not. Unless you think that these supply chain disruptions will continue for the next 20 years, it's bit too early to declare the firms hit by them dead in the water.
Exactly. Governments shouldn't bail out any corporation without a hefty share of ownership in exchange. We did it for Sallie Mae, and we can do it for Intel, Boeing, and the airlines.
no, we the people via our governmental apparatus should essentially force bankruptcy early enough (like the FDIC does for failing banks) and sell the assets in a widely-held auction (for fair price discovery), so that a competitor can keep customers from facing undue externalized risk, and creditors and employees can be made whole, while owners take a bath on their equity. the fundamental downside of taking risk has to exist for economies to keep moving towards efficiency (which our economy is frustratingly not because of said financializations and the like).
I agree with this sentiment. And if you let companies fail, then you open the market for leaner, meaner companies to acquire their assets and build better products.
As it is, we keep some of these giant companies on life support for years or decades, allowing them to crowd out competition with their sheer size, while also failing to really produce good products that serve their customers.
The thing is the downside of risk taking still exists. It just shifts from an individual risk(the corporation) to an existential risk(a big chunk of the economy).
The only way to prohibit this would be to cap the maximum size of a corporation. My guess is lawyers would just come up with some legal novelty to work around this in no time at all.
"...It just shifts from an individual risk(the corporation) to an existential risk(a big chunk of the economy)."
but that's the point of the early-enough forced bankruptcy - to salvage value and re-internalize the downside risk to owners only.
i'm totally down with limiting corporate size, not via a direct statute to that effect, but via a high-functioning antitrust department along with severely progressive taxes. you can get as big as you want, as long as you can internalize all the downside risk of being 'too big to fail'.
We need to enforce antitrust laws, or make new laws if those aren’t sufficient. Large companies have insane levels of control over our lives, and it’s not healthy for society. Just look at Facebook and Google’s stranglehold on information, or Apple’s 30% fees on most iOS app revenue.
This approach suffers from the same fundamental problem as the comparative advantage argument - that there is an infinite reservoir of companies that can immediately rehire the now laid-off talent at equal or better productivity
Real world doesn't work that way. Real world looks much more like the deindustrialized parts of the UK or the US, or the collapse of Soviet economy after switching to capitalism. Companies go bust, taking the whole supply chain with them, workers are laid off and disperse. After a few years, the skills atrophy and the experience vanishes - you cannot put humpty dumpty back together again. More often than not, the workers stay unemployed, underemployed, or just cheat disability. In high-end consolidated markets like semiconductors or aircraft manufacturing, we're not talking about an infinite reservoir, it's a handful of corporations per continent
bankruptcy saves more of those jobs than letting a company dissolve completely, because the company is allowed to shed debt (and equity) and reorganize. it’s also better than nationalizing, because it preserves the profit motive that is better at ensuring the company will stay/become competitive and survive in the long term without government support.
i’m totally good with throwing out the senior leadership and letting new leadership grow from within though. claw back their bonuses and golden parachutes too.
Why would the government take on actual work which they would promptly fail at and profits would soon go to zero ? They can just keep on collecting the sweet 21% corporate tax in addition to payroll taxes and income taxes on all the employees instead.
That ignores the fact that older businesses tend to financialize to drive growth in equity value once revenue has stopped growing and older companies tend to be the most prone to disruption/failure.
Intel’s downfall can be tied back to an org structure that made up for bad gate-level architecture choices with proprietary fabrication techniques. All that customization crushed intel’s ability to compete with TSMC in foundry and the lack of architectural discipline prevented them from even coming close to fast-following QCOM SoCs or NVDA GPUs.
Keep in mind, for all the talk of Intel’s bad management and over-financialization, BK was a foundry engineer and he oversaw the worst period of decline.
> My takeaway is that working hard to build quality products is more likely to be profitable than working hard to make money.
Except that it isn't.
"Manufacturing" has known limits. You need this many people to make this many things and your things sell for this much. There is growth, but the values are limited. And, if the company is dying, it is a very slow process and can still generate a remarkable amount of cash while doing so.
"Financialization" has no such limits. The sky is the limit and can do so really quickly. So, it looks great. Your gains can be close to infinite.
Unfortunately, quick and infinite can also describe your losses from "financialization".
This killed Westinghouse. It also crippled GE quite heavily. There are many other examples.
I’m not sure I follow your argument because you appear to disagree, but then support, the premise :) So I’m probably misreading.
But ISTM that the thing with constrained environments like manufacturing is that the constraints are physical, so everyone is constrained, which means that in a highly competitive environment, all viable players should be optimising and striving to work on the edge of what’s possible, in order to maximise competitiveness and profitability.
So in such an environment, it’s absolutely necessary to “work hard to build quality products”, just to remain in the game. If you instead direct your resources to something else (like financialisation) at the expense of building great products then you will fall behind the leading edge and become uncompetitive or, perhaps worse, a commodity player.
This certainly seems to be what happened at Intel, and also Boeing, both of whom appear to have fallen well back from the edge of what’s possible.
I think the main reason financialisation is easier to do than engineering, is because money is a universal language, and Verilog is most certainly not. Shareholders seem to invest in order to make money from transactions, rather than dividends, and this seems to be a structural flaw in the financial system.
My point is that the question is how you define "profitable".
The current definition of a "profitable company" is all about the stock price increase.
The problem is that manufacturing has a hard, fixed, upper limit on how much you can manipulate your company. Your Thneed(tm) sells for $X--you can't dramatically increase the price per unit (barring monopoly status). You probably can't increase demand dramatically either. You can only reduce labor and R&D to zero. So, the maximum amount of cash you can earn is completely constrained and straightforward to compute. Your stock price has some relation to this and thus also has a limit.
However, if you switch to "financialization", there's no limits. You have margins. You have multiplers. Things are easy to hide and difficult to compute. The stock price goes gangbusters for a while and you have a great "profitable company". Then something goes wrong and suddenly the business needs cash rather than "financial instruments". Then the "financialization" unwinds and kills the core of the company.
The problem is that the "stock market" has become "lottery tickets" instead of "corporate ownership". People demand stock price increases even if the business is quite profitable--this means that "financialization" will always triumph.
Not to argue over a technicality but "profit" means the difference between income and expenditure. I think what you mean is, profit for the shareholder rather than profit for the company.
I agree with all your other points though. The goal has changed from "running a good business" to "shareholder benefit at any cost". I don't think that's in the spirit of capitalism, somehow.
> You need this many people to make this many things and your things sell for this much.
Speaking with no manufacturing experience, but having read some books (Diamandis' Abundance).
You can reduce long-term costs by automating. If each week you buy a robot replacing a human, your operational costs go down permanently. That is because robots are fundamentally cheaper than human time.
Of course, you have to foresee the demand that would make it possible to recoup the costs.
Boeing won't have failed until someone starts a competing company that stands a chance of replacing it. (Airbus is the same thing, very corporate, very closely tied to governments, but in Europe).
Because of regulatory capture, any competitor will have to be even _more_ subsidized than Boeing is.
A few years ago, Bombardier introduced a new plane, the C-Series. Even though it did not immediately compete with Boeing's own offering, Boeing successfully lobbied for an extravagant 300% import tariffs to be be applied which killed the primary market (US) for it. Canadian government folded and essentially gave the otherwise technically successful project to Airbus in the hope of salvaging any industrial returns on eventual mass production. The airplane is now known as the A220.
Any would-be competitor will not only be fighting Boeing, but the whole US government.
> On 10 January 2018, the Canadian government filed a complaint at the World Trade Organization against the US.
> On 26 January 2018, the four USITC commissioners unanimously determined that US industry is not threatened and no duty orders will be issued, overturning the imposed duties. The Commission public report was made available by February 2018. On March 22, Boeing declined to appeal the ruling. While the USITC had determined there was no threat, the ruling came too late for Bombardier, as the dumping petition by Boeing had already paved the way for Bombardier to relinquish a controlling interest in the CSeries to Airbus in October 2017.
This is just a repeat of the Avro Arrow story. US demanding free trade from everyone and then just bullying its weight around when someone comes along with a better deal than what they can manage.
lol. true but at the same time look at it from americas point of view. aviation is a milatary threat. they need to have an in house team to own that shit. Putin is going to be screwed because he has no aviation industry compared to the EU and US.
Commercial aviation isn't, though. And Bombardier is a neighbour and ally.
And ... Putin has a significant aviation industry. For a while they were the only country able to launch humans into space. And as far as I know, they're flying MiGs in Ukraine.
But my comment was really intended to say that the "freedom" we are supposedly entitled to is actually a gift, with limits, and there are few better ways to discover those limits than to threaten a very large company.
Canada is already experiencing a constant brain drain to the US - there just not enough Canadian success stories to stay around for. And finally this Bombardier success comes along and the US kills it. Why aren't Canadians more mad?
Bombardier had a superior product and had a massive sale to Delta lined up. Boeing came in with the government and added 300% tariff. Talk about "free market."
> No company is safe. Boeing is exactly the type of company that won't know they're dying until they are dead.
Yes, but they're in a sufficiently protected region of state space guarded by landscape difficulty, moats, massive contracts and cash flows, the government, you name it.
You can't just build a better plane from zero and immediately start taking orders. You have to start with something small, tangential, and then grow into that market. That's still very hard to do in aerospace because the requirement is "don't kill people" yet the problem involves putting people in mortal danger.
I don't doubt that it could happen, but I think it's a very tall order.
A certain car and spaceship building entrepreneur I could see taking a pretty big chunk of Boeings pie if they wanted to expand or split off in that direction
There's a raft of product failures across the board. Not making saleable product is kind of a problem. Boeing's been working on Starliner since 2010 and it has yet to carry anyone to the ISS. Then there's MAX. And the SLS (which hasn't failed yet but /will/ be a 4 billion disposable program, at best.)
Maybe true, it's business profitable, successfully extracting money from airlines and government contracts.
> My takeaway is that working hard to build quality products is more likely to be profitable than working hard to make money.
In the long term. But in the short term, you can make more money by not caring about the long term. And given the way US CEO tenure has declined over the years, for a lot of execs the long term is somebody else's problem.
> working hard to build quality products is more likely to be profitable than working hard to make money.
This seems like a short-term vs long-term thing. You are often going make more money in the short term by chasing the money (e.g. financialization); but if you aren't careful you will undermine the core value of your company.
It's pretty clear that people have made many companies more profitable by this sort of approach, at least for a while.
And Sun Microsystems. Great engineering but then they wanted to nickel and dime everything and wanted to be the mainframe for Unix, when all the action was happening at the lower end.
It's unlikely Sun could have made any money selling lower priced systems based on commodity CPUs. In fact they tried this several times without much success.
Is there a cure for such pathological capitalism? It's so pointlessly destructive it's demoralizing. Why even bother creating anything if it's just gonna be exploited for maximum personal gain to the point of self-destruction later?
It makes me feel like a sucker. Why am I even trying to create something when these literal sociopaths are making more money than me destroying years worth of other people's work? Maybe I should be like them instead. Why create when destruction is easier and more profitable?
IMO, Boeing's problems started when they "merged" with McDonnell Douglas and the latter company's management took over. They ran MD into the ground in the 80's and 90s, and then people decided they should have a go at Boeing.
in Intel case, working hard to improve yield is more profitable. Intel didn't make a profitable yield in 10nm process thus endless cycle of cpu release in 14nm.
Investors can take Intel dividends now and invest them in AMD stocks for future profit and be better off in the end. The only people losing are those who expect a secure job until retirement at Intel.
And this is why AMD and Apple are eating their lunch now. I'm super happy Intel is going to build a next gen fab though, mostly because I'm concerned about the imminent threat of China taking over Taiwan and TSMC with it.
Frankly, I don't think it's as close as people make it out to be. AMD has done some incredible stuff (particularly with their mobile APUs), but Intel is on track to have them beaten to the punch at every point on their roadmap. We're still half a decade off from BIG.little Ryzen CPUs, which really scares me considering how much mileage Apple and Intel has gotten out of it already.
Apple, on the other hand, has put up a bit of a fight. They bought out the entire 5nm node from under the rest of the industry, for better and worse, and then they changed the game again by putting the ball in their court (mobile chipsets). At this point it's hard to even say they're competing against AMD and Intel; the two are chasing entirely different markets at this point. When they do butt heads though, watching the sparks fly has been spectacular. Despite being on decidedly worse silicon and a veritably slower ISA, Intel has managed to refute every one of Apple's offerings with a decidedly cheaper processor. I really do look forward to their response to the M1 Ultra, because I feel like the chip wars have only just begun. With Pat Gelsinger at the helm, Intel has set a warpath through the industry, and their recent performance metrics seem to cement their intent on being the best in the biz again.
I'm curious: are you at all concerned that Intel cannot deliver performance comparable to Apple with a reasonable wattage? If you consider battery drain at all, Intel is no contest.
A partial explanation for this is that Apple A* cores by volume overwhelmingly go into extremely battery constrained devices whereas for Intel its a plurality of their volume at most (and even then laptop use cases are less battery constrained than phones or tablets). Further, until very recently Intel had no reason to optimize for laptops because AMD was a non-factor and ARM based machines were only barely a thing.
Core design is astronomically expensive so given the opportunity to build only one core (or two in the case of big.little) it seems reasonable that Apple's perf/W would be superior since they have had a very pressing business need for it. Add on that they have so far been built on one to two nodes ahead.
The point being, I think if Intel still can't get close to Apple in 2-3 years then there is a bigger problem, but as of now I think there are still some reasonable explanations as to why their current products are behind that don't come down to technical inability.
A year ago yes, but today Intel's Alder Lake CPU's are excellent, trading blow for blow against AMD's and Apple's latest and in many benchmarks outright beating its competition. The only serious draw back is the power consumption - but considering that they are on a worse node process that's not too surprising. Give Patrick Gelsinger a few years at the helm and we'll see if their plan to recapture fab leadership succeeds or not.
It is not buyback is inherently evil or wrong. Surely we could all agree if your stock is trading at P/E 1 with no debt it would even make sense to take it private right?
It is using cash as buy back while not giving enough budget to R&D or product improvements. Apple didn't do that. They invested accordingly and still had too much money and didn't know what to do with it. Although one could argue they could invest and bring even more value to their customers. But Tim Cook think those were better for shareholders.
Compared to Intel, they stopped investing in foundries. Partly because of their 14nm were over provisioned and partly because of their broad. Along with their 10nm failures. It really was a perfect storm.
Apple under Cook has done all the cost-optimization things you would expect a COO-turned-CEO to do, but thus far it doesn't seem to have hurt their ability to continue to innovate and produce new high-quality products. A possible answer is that Tim Cook is simply much better at it than most CEOs, and understand where he can get away with a focus on cutting costs and where he can't. It may also be that they've just gotten lucky, or that Apple just had _that much_ momentum that a decade isn't long enough to start seeing problems.
The iPhone is one of those breakthrough devices that every person needs and probably needs to have on them at all times and they've converted that ubiquity into many adjacent markets.
At this point the only way out for us, from both iOS and Android, is if they both miss the next big form factor, maybe smart glasses and AR/VR. Basically, the next OS.
I am of the opinion it hasn't affected them YET. Just a lowly developer waiting for his MBP for over 11 weeks now, waiting for Intel's mobile Alder Lake to roll out so I can cancel my order and pick one up.
>mostly because I'm concerned about the imminent threat of China taking over Taiwan and TSMC with it.
Isn't TSMC building infrastructure out in Arizona? It might not be full featured but it creates a launch point for protecting a world wide asset.
https://tsmccareers.com/tsmc-arizona/
It's a good point, but a little old in the tooth and not really fair apples-apples comparison Foundry to IDM. Intel's transistor density at "10nm" is closer to industry "7nm". Really, I think it was the desire to continue multi-patterning rather than go with ASML's expensive EUV equipment for a last generation. Bad bet!
I have always been confused by these issues of corporate governance. All these things seem like they should be owned by real human beings, but it is impossible for me to understand who actually owns and controls these companies. They are simultaneously treated as their own entities that make their own decisions while also being completely controlled by a few big shareholders. And often these shareholders are themselves companies, perhaps owned by other companies. And then you get weird stuff like Porsche's attempt to purchase VW, which wound up with VW purchasing its own largest shareholder. It's all incomprehensibly far removed from what the goods and services that are the real purpose of our economy.
Also, the CPU in the picture is upside down. Maybe this is a shallow criticism (especially since the picture was probably chosen by an editor), but I am reluctant to listen to people who would make such a basic mistake.
> Also, the CPU in the picture is upside down. Maybe this is a shallow criticism (especially since the picture was probably chosen by an editor), but I am reluctant to listen to people who would make such a basic mistake.
If you want to hear the opinion of someone who is actually involved in CPU design, this is a ridiculously shallow take, and you should seriously recalibrate
I am well aware of that, but it's so ludicrous that it reflects badly on the publication. The presence of that picture shows that no one knowledgeable looked over the article before it was published. What else could have slipped by the editors?
I think financialization is something you do in the later stages of a company's lifecycle. It is how you extract the most value out of the company as money, rather than potential.
I think companies have pretty clear life cycles. First they start, they grow, then the plateau, and then fall. Sometimes you may get a few bumps in the road, but generally this is the long-term cycle.
Financialization makes the most sense to engage when when you are plateaued and possibly falling. You can still extract value.
I think that the fall of Sears was a great example of the financialization and extraction of value of a dying company.
Financialization is trading off future potential growth or even long-term staying power for $$$.
Doesn't this feel like a self-fulfilling prophecy? It's like saying "if things are going bad, then just try and extract value."
But if extracting value makes things go bad, then it pretty much leads to a death spiral.
I feel like a more helpful framework is: if you're giving up on competing, then financialize, while recognizing that a) it's probably gonna kill your company, and b) value extraction from users [especially those who have little choice in using your products!] is no fun for anyone!
Death spiral? Their stock looks OK. My Core i9 still goes so fast. But for the past few years, if you only read Internet comments, you'd think Intel is about to go belly up tomorrow. This same thing happened twenty years ago. For example:
> NYTimes - Nov 29, 2004 — The Disco Ball of Failed Hopes - Intel, giant computer chip maker, seems to have lost its way lately; has publicly ... including the 25 percent decline in Intel's stock price this year
As far as I can tell, things are pretty good for the Intel/AMD duopoly. AMD's stock is up 1000% in the last five years. Right now AMD is on top. Just like how AMD was on top around 2004. Then after a few years of AMD winning, Intel turned it around and became on top again. It's like democrats and republicans.
> As far as I can tell, things are pretty good for the Intel/AMD duopoly.
This is no longer a duopoly. We have Apple Silicon and Windows on ARM has gotten new life. AMD and Intel don't have the x86 monopoly on the desktop and laptop market anymore.
I'm probably not the only person that switched to a MacBook in the last two years because their products are leagues above what AMD and Intel offer. This is the first Laptop I've had that's quiet, has 10+ hours battery life and doesn't lag.
Every Windows laptop I bought or tried in the last few years was a disappointment. They cost $ 2000 or more and feel slower than my old i7-3770k at home. They say they have improved battery life but in reality it's still only 4-6 hours if you are lucky (if you want M1 performance 2 hours...).
I agree this won't be the end of Intel or AMD and I think we have seen some progress in the last few years and I will be trying out the new AMD laptops in summer. But there is definitely a lot more competition today than in the last 20 - 30 years.
Sometimes there's not much you can do. It can be the case that, you know business as you know it will end and that no level of investment into a replacement will yield a competitive product (i.e., tube tvs to LED/Plasma, movie rental places, etc).
Even innovation powerhouses can eventually fall. Those that stick around often shed the business units that made them successful initially (GE). One good way to extend the life of a company is to acquire your eventual replacements before they get a shot at you.
Business is hard, and most profitable businesses have a shelf life.
I think it's not that clear. Where I work (hp) you could argue we're like Intel: large public company, shareholder oriented, buybacks, etc. However, we've also gone through a series of consolidations, split-ups, spin-offs and so on. At this point our own company and all our cousins and step-children all have bits and pieces of a whole bunch of different companies.
Also, I'm not sure why a blue-chip company can't just keep on existing. We pay a lot of dividends to keep our investors happy, which means less is available for R&D. That doesn't mean there's no R&D, though, the challenge for a CEO managing a company like this is to balance the two competing demands. Competitors that aren't focussed on crowd-sourced shareholder demands can make disastrous decisions more easily.
Blue chip companies need to get better at spinning off internal units into startups.
Every blue chip that I've worked at had internal products that someone eventually founds a startup to copy. Sometimes, it's even an internal employee that leaves to start the new business.
Financialization can be good for consumers in the right context. Being a cutting edge processor company is not one of them, though.
But there are plenty of products that become "perfected" over time, and investing into R&D can just be wasteful and raise the breakeven price of the product, thus raising cost to consumers.
It's true that a company could strive to become a conglomerate and in theory get higher returns on new R&D, but it's been proven that conglomerates often lose focus and are harder to carry into perpetuity. Generally conglomerates that spin off focused companies create more overall value.
Though depends how you define financialization of course. In this context I just mean cost cutting, being strategic about lowering marginal costs. Excessive dividends or buybacks don't tend to be good for consumers. In some cases they can lower the cost of capital for a business this allow more cost efficient financing though.
I think it is the fate of companies that got big on innovation, but lost their edge because they got too far ahead and priorities shifted. They lose their ability to be innovative as others catch up so they have to find other ways to give shareholders value.
We'll find out. We have four companies worth over US$1T, adjusted for inflation this is larger than any time in history (including Rockefller IIRC). Who knows where this is going to go?
(I think about MMORPGs where stats just keep going up exponentially, like how in WoW classic, top DPS was like 500 and now its like 50,000. But that's just a game.)
For now it's not super clear since we have a lot more stuff in the world, a lot more money, and real ones, too, not just paper money. Actual production and services.
Developing countries, including China have added probably between an extra 30 to 60% more middle class folks with disposable income. That's going to grow because of India, Africa, South East Asia.
The bigger long term threat is the unsustainability of this, global warming and destruction of ecosystems.
That doesn't mean we'll avoid a major wealth wiping financial crash this decade but we'll get over it and continue to grow.
Presumably what we saw as "fall" from the outside was Apple pouring hundreds of millions of $$$ into building M1, fixing design flaws in newer MacBook Pro lines etc.,
Give profits to investors, or reinvest? That seems like the main issue, more so than "manipulation".
Of course if you give profits to investors, that allows room for others to out-invest you.
But the assumption throughout the article is that, if Intel had reinvested, it would have been a good investment. That's far from clear, given that we know how wasteful organizations can get when they are top dog and flush with cash.
You still pay capital gains tax when you sell the shares. Buybacks don't let investors avoid taxable events, they just allow investors to control when the taxable event happens.
Whereas with a dividend, you pay tax immediately when the dividend is issued.
They don't trigger a taxable event for shareholders who continue to hold the shares. They (obviously) trigger a taxable event (and a more concentrated one) for the sellers of the shares which were bought back.
Yes, I realize that but it’s still a major problem.
The ultra wealthy never sell their shares for this reason. Instead they opt for taking out endless loans so they don’t pay taxes on their capital gains.
They also offset shares created for stock based compensation. It's common for the number of outstanding shares to increase even in quarters companies do buybacks, because stock based compensation is bigger than the buybacks.
Since newly issued shares are not tax deductible for the owners, you'd basically be paying tax even if net zero capital is returned.
Everyone has to eat, and that takes money. But you can only eat so much, and at some point hoarding money is nihilistic and boring. Do innovative things, otherwise, what’s it all for? The “make money number go higher” mentality ruins everything.
Well-adjusted people get to the point where they have enough money and they switch to doing something other than money-chasing. So in any cohort of people who got rich, the only ones who stay in the chasing-money game past that point are the sociopaths -- the chasing-money game actually selects for these people. Then they end up in charge of the vast majority of the population who do not (yet) have fuck-you money and who play the chasing-money game because they need to eat.
I don't know how to fix this. There are a lot of knee-jerk proposals but none of them will work.
Nice quote comparing "Maximizing Shareholder Value" (MSV) to a virus. Another US company infected with this virus is Boeing - the whole tragic 737 MAX debacle was ultimately caused by MSV, and Boeing got the virus when it acquired McDonnell Douglas in 1997...
Intel is doing badly recently, but it still generates a lot of cash and lives in a world with chip shortages everywhere. It says its going to invest in new fabs, surely it can catch up with TSM and SEC if it tried. It seems like an industry with so much potential, how can it fail?
My understanding as an outsider to chipmaking is that Intel's model involved repurposing old fabs so they could make new ones out of the old. TSMC's model is to keep using the same fab for years and years.
Because the chip shortage is largely for older, cheaper silicon, Intel's model doesn't allow for building the chips that are actually needed right now.
I think the other elephant in the room that not many are talking about is that we have reached a point where most people do not need the latest and great CPU anymore - many can still get by with something 5 years+ old. In the old days stagnation like this could have been a death sentence for Intel but modern times are much more forgiving if they can still play catchup eventually.
Back when Intel were really resting on their laurels it was hard to tell. Now we have M1/Ryzen you can reach some sort of conclusion depending on your view of those:
- doesn't unlock some major new application for computers, 99% just want Office 365, which ran just as well on Sandy Bridge -> whole industry stagnated, being a couple of years behind is fine
- (M1 especially) battery life/perf is improved in a way that will matter to many -> Intel specifically risk being left behind in sector that still has the potential for big changes
Intel can't start filling gaps in the market for car ECUs or whatever, but there has been a shortage of PC components too, people are buying whatever is available, so it's an ideal moment for Intel's down-cycle to be happening - sales numbers will be more about manufacturing capacity than the strength of the product.
Nokia had it's business area erased. Nokia is closer to what happened to IBM, not Intel. It wasn't outcompeted by companies doing the exact same thing.
I was there when this happened. So many short term decisions to boost stock price, company objectives focussed on market cap than innovation etc. It was very painful to see in from the inside, first hand.
The otherwise quite good article repeats the common mistake of not understanding that what Intel calls the feature size (e.g. 10nm) is not equivalent to what TSMC calls it, giving the incorrect impression that Intel is further behind than they are. Intel 10nm is the same density as TSMC 7nm. But I suppose you could argue that this is Intel's own fault for not doing much about that misunderstanding.
I think there is an inherent temptation for any high CapEx business to financialize. Inherently, a company like Boeing or Intel needs to manage 10s to hundreds of billions in assets. This will inherently require a high skill finance department who will then look at the company from a spreadsheet perspective. This has been the trajectory of GE, Boeing, Intel, and I'm sure others.
This is interesting to wonder why Intel stumbled so much and has lost so much ground. I suspect the basic premise of this article - that C-level were focused on share price rather than innovation - probably explains it as well as any one thing can.
I think that is a gross mis-characterization. It is absolutely self-afflicted, more like a drug addiction.
I'm not sure I've fallen for an internet myth or not, but I thought publicly listed corporations were required by law to act in the interest of their investors returns, 'by law' meaning they can be sued by shareholders. Or is that misinformation?
> The Business Judgment Rule asserts that as long as the Board of Directors conducts a reasonable effort to make informed decisions about what is best for a company in the long-run, a court will not question said decisions. [1]
My layman's understanding is it's fairly narrowly interpreted and really isn't as ever present in the backs of the minds of board members as the internet would suggest. you have to demonstrate some pretty awful judgement or get caught admitting your reasoning for a decision was opposition to shareholder interests.
The simpler explanation is that board members and executives have perverse incentives to act in short term interest so they do. As long as they avoid doing it negligently then they won't face any consequences even if most shareholders want a long term approach.
The problem is that "maximizing shareholder value" is what corporations should do, but it's also ill-defined.
You see this all the time in debates about whether a company should re-invest earnings or pay dividends.
The reality is that "maximizing shareholder value" is just rather vague, therefore meaningless. You need much more guidance than that.
If "maximizing shareholder value" is often misconstrued in some particular way leading to accidental value destruction, then I would say that misunderstanding is akin to a virus, yes.
I think virus is actually pretty apt. The host (the company) is infected by the virus (predatory executives, short term investors) that feeds in order to multiply and get fat to the detriment of the host.
You don't think that Intel spending substantially more on stock buybacks and dividends than TSMC and Samsung over the last twenty years had any notable impact on their competitiveness?
A good point the article made is that Intel now wants subsidies to finance their R&D. Which is basically the government subsidizing the stock buybacks.
I think in a situation like that the subsidies should come in form of the government buying bonds from the company or Intel offering a stake in the company so the government can profit from their investment in the future. Otherwise it's just redistributing money to capital owners, which is stupid and gives an incentive to make bad business decisions.
They are asking for them, but it's important to contextualize that the entire chip industry is receiving boat loads of cash abroad. Case and point South Korea has announced $451Bn in chip subsidies [1]. Which dwarfs the measly $52bn American Chips Act subsidies [2]. America could sit it out and risk South Korea killing American fabs like it killed American Commercial Shipyards in the 80's or it can respond with subsidies of its own.
Whilst having a degree of sympathy with the point being made here I think that the underlying issue is mainly with Intel’s failure to establish attractive propositions in mobile and GPUs whilst they had process leadership - and these failures aren’t really as a result of low spend on R&D or Capex.
You can see the rather large change under Gelsinger: https://ycharts.com/companies/INTC/stock_buyback