After almost a decade advising on large cap M&A in Wall Street, my biggest takeaway is that activist investors play a fundamental role in capital markets. I think a lot of the hate they get is fabricated by the status quo in PR wars. If I were considering going back to M&A, that gig would be at the top of my list.
I'm honestly surprised we haven't seen activists clamoring for this board to be replaced. Maybe it's too late for Intel and nobody has the stomach and stamina to try to turn it around when there's easier money to be made in a very favorable environment. Or maybe it's too early and an activist is indeed slowly buying up a position but hasn't hit the threshold after which they must disclose their stake.
The cycles are so long that I think it's hard for activists to get in, set a new course and exit with a profit.
Having said that the stock is so low at this point something will probably happen. I think private equity taking it private for 5-10 years would let the company work through a long term turn around.
Similar to what's happened with Yahoo. PE could buy it, spin out/sell the most distracting adjacent parts of the business, and then focus the core business over the next five years without needing to publicly deliver quarterly updates.
It would be a massive PE deal, but not outside the realms of possibility, especially if the stock drops a few more percent.
But a company like Intel can't be spun up/replaced on anything less than even more subsidies and probably 10 years of nondelivery/noncompetitiveness. A chip foundry and chip design of this level takes a long time to reach competence. Hell, if you are 1 generation behind status quo, Intel shows it can take 3 years to catch up, if then.
This company isn't a struggling retailer in a sea of retailers (Sears) or some rando restaurant chain selling potato skins, blooming onions, and nachos (TGIFridays).
This is a top-line chip fabricator, in a geopolitical environment where supply lines/shipping lines are under threat in the Pacific, demographic collapses in China, Japan, and South Korea are underway, and a president that wants to start a tariff war.
National security concerns underline Intels importance. It isn't some chopshop private equity spreadsheet play. If you split it you need functional mission-based companies.
Intel has something like a dozen fabs. I would subdivide those into the lines of business their process nodes can serve, from embedded / industrial stuff, board chipsets, whatever.
Identify the process nodes desperately needed for economic protection from a hostile/collapsing China (same thing basically in economic impact). We need state of the art, so the latest and n-1 fabs get wrapped up, but we likely need a boatload of second and third tier node production as well.
I think Intel's fabs can be split in the n-2 and n-3 nodes into two competing companies, because the US doesn't need monopolies, it needs competition, and that will be the path to far better utilization of subsidies and speeding up production independence from the Asian rim.
I cannot believe Intel has failed at integrated graphics for so long. I'd like a competitor to NVidia besides AMD.
Setting up functional subsidiaries like this will absolutely not happen with private equity chopshops, all run by the same financial illusionists that have crushed Intel and Boeing.
But that's not how the oligarchy works. It'll be something that maximizes concentration of the subsidy check by the same incompetents that "manage" Intel right now, and the subsidy will be squandered.
I cannot believe a Boeing fuckhead is now the interim CEO. Nothing will go well, these people are survivalist lizards that care about their careers and stock options and parachutes. That Boeing guy likely engineered the ousting, he's a slimy survivor of corporate Machiavellianism.
I invite him to prove me wrong, the country needs it.
I feel like Intel was ahead for a very long time and perhaps intentionally coasting and then suddenly in the span of a few years they went from barely any competition to losing best in class in compute to three separate competitors. AMD having great consumer processors and now beating in sales in data centers, Apple having without a doubt the best consumer processor, NVIDIA completely owning the machine learning compute market which is now enormous.
I think beat case is NVIDIA buys Intel and spins off some of the less mainline business units.
In dire straights I don’t think the government would allow Intel to fall to vultures and instead would compel them to continue operating at any loss rate and then if they failed to avoid bankruptcy nationalize them in much the same way as AIG or General Motors for long term reorganization.
Literally all that happened is Intel lost the fab lead and then lost fab parity. Their CPUs were, and are, still competitive with AMD chips, or at least close enough that they can just adjust prices to make up the difference.
Fabs are extremely expensive, and an uncompetitive fab is literally just a pit in which you toss money. That's Intel's current problem.
I have seen this phrase used a few times here. Is there such a thing? Sure, a fab can be old and produce chips with larger transistor sizes, but there isn't a lack of demand. Only a tiny fraction of ICs need the latest transistor sizes.
To be clear, do you any inside information / career experience that you know that existing Intel fabs are losing money? I have not read any such reports in media.
As a counterpoint, Europe and Japan are no longer cutting edge in their fabs, but continue to produce many ICs for industry.
Intel's financial reports show their fabs losing billions every quarter.
Nevertheless, it is hard to know how real are these numbers, because the prices charged by the Intel fabs for making Intel CPUs are set internally, so they could be manipulated to move all losses on the fabs from the consumer and server product divisions.
Moreover, for the latest Intel fabrication process for which anything is known, i.e. Intel 4, which is used for making the CPU tiles in the Meteor Lake CPUs, it is known that the fabrication yields have been much less than desirable, which had two outcomes, both less profit margins when selling Meteor Lake and the inability to produce as many Meteor Lake CPUs as they could have sold. Both effects have increased the financial losses suffered by Intel during 2024.
In general, "uncompetitive fab" can mean two things. Either there are things that the fab cannot do at all or the fab has too low fabrication yields at the things that it can do.
The Intel fabs are in the second situation. They can do about the same things that TSMC can do, but at much lower fabrication yields, which means much higher production costs. High production costs means low profits and Intel is a company that has been habituated to have huge profits, so it cannot manage well the case when its profit margins are very thin.
The lower yields than TSMC would also cause lower profits when making chips for external customers, so Intel must really improve their yields.
Old Intel fabs are refurbished, by installing modern equipment, so they are converted from old CMOS fabrication processes to recent processes.
Before being converted, the fabs spend a few years making peripheral chips that complement the Intel CPUs, e.g. the so-called south-bridge, which may be packaged together with the CPU for laptops or it may be a separate IC package for desktops, and which does not need a fabrication process as dense as the CPUs.
> Only a tiny fraction of ICs need the latest transistor sizes.
The problem is that the latest transistor sizes are the ones that have profit margins. 90% of TSMCs chips aren't on EUV processes, but 50% of their profits come from EUV. If you don't have leading (or close to leading) processes, you're completely shut out of the phone, laptop, server, and GPU market. Intel could survive like that, but it would involve laying off ~90% of their staff and exiting all of their major markets.
I would politely argue against the word “collapse”. It’s overly dramatic. It makes no sense when talking about societies. Peter Zeihan uses the word a lot but that doesn’t mean it’s correct. Peter just knows that fear sells. But what does it mean for a society to collapse? One day all is fine and the next day it is not? “Downward spiral” seems more appropriate.
When a bridge collapses it doesn’t happen in one go - first a couple of bits are rusty, some foundations are crumbling and not tended to. Then a couple of supports fall off but it’s fine because it’s summer. Then winter comes with the extra load than entails, snow, rain.
It’s fine, the bridge remains up but now one of the remaining supports is working back and forth every time a car goes over it. One day a heavy truck goes over it.
One day the collapse is apparent to us all, and complete. But it began long ago when maintenance was neglected.
> One day the collapse is apparent to us all, and complete.
This only happens in historical retrospect. The sacking of Rome in 476 theoretically marked the collapse of The Roman Empire in Western Europe but nonetheless people all over Europe continued to live in a Roman style and think of themselves as citizens of the Roman Empire for a very long time.
We won't know when our society has collapsed. Our grand children may.
I generally agree, however a counterpoint is that modern technology has made the world smaller and consequences arrive faster. No longer does news travel at the speed of a mule drawn cart, now it happens at a significant fraction of the speed of light.
We're highly dependent on external capital, technologies, materials, and resources -- not to mention goodwill enabling trade and avoiding social chaos. All of these can and do change in a matter of months, and the speed of the collapse can be amplified by smart individuals making self-interested decisions, and even more by bad actors working in concert for strategic reasons.
This. Dependence on technology and outsourcing of basic survival needs (like food, medicine etc), has fragilized our civilization to the point that collapse would have an exponential rate.
Could you give a clear example from history? Usually it isn’t clear. For example, historians are still not in agreement about when the Roman empire ended [1].
The activist playbook isn't limited to chopping up shops or any subset of the PE playbook.
Intel stock is likely so undervalued right now that an activist can just come in, throw a fight deck at the board, show to the market that they will put _some_ better board in charge (shouldn't be too hard), get the votes they need, replace the board (partially), see the stock rally (pick a number) 20% on improved sentiment and expectations, gradually unwind the position and move on.
Demographic cliff on a scale not seen: yes Japan is going through one now, but China's is simply unprecedented in the sheer numbers
Authoritarianism: China is rolling back free market reforms, centralizing power under Xi
Finance: China has a real estate and debt bubble at the regional government level.
War and aggression: China US relations are approaching cold war levels and a Taiwan invasion seems likely. Four years of trade war is imminent.
Depending how it plays out, any one of these is trouble for offshore manufacturing in China. I suppose collapse is a strong word, but it is stupid to rely on Chinese production both for a company and in terms of national security.
Zeigan has been singing this tune for a decade, but recently there are many other geopolitical talks I've seen repeating each or all of the four issues I've listed above, and the demographics aspect is inevitable at a minimum.
The "China collapse" claim is indeed not new, and it is as wrong as ever.
The demographic situation is manageable, especially given how the generation entering retirement are factory workers, who are being replaced by automation on a massive scale. The generation which enters the labor market has a much higher number of college degrees.
Real estate bubble doesn't concern most Chinese citizens, but only those who used it to speculate, despite being warned by Xi not to[1]. If you own a house for living inside, you don't need to care if its resale value goes up or down. Still, deflating the housing bubble was painful, but China managed to grow the economy through this anyway.
About war, I don't think so, at least not in the next 4 years. Trump and several Republican leaders made it clear already that they don't want to defend Taiwan, so the Taiwanese government will likely refrain from things which could trigger armed conflict. Even if things escalated, a naval blockade would be more likely, and the US public largely doesn't support entering into direct conflict over that[2].
> Still, deflating the housing bubble was painful, but China managed to grow the economy through this anyway.
China hasn't deflated its housing bubble yet. Yes, real estate turn over has basically ground to a standstill, but that doesn't mean many have been forced to take a loss yet. The reckoning still hasn't come, and should look something like a larger Japan property bubble pop when it happens.
Still, the US is screwed since China is basically going to own automation via its current investments (along with investments in EVs, green energy, and HSR). If they can figure out their chip and jet turbine problems (still not solved, they can't make fast chips economically yet, or even expensive ones without western equipment), they have everything in the bag, so to speak.
> The reckoning still hasn't come, and should look something like a larger Japan property bubble pop when it happens
While there are still risks for the economy from real estate, I think China has shown the ability to manage them. For one, they were able to slow-walk the Evergrande collapse and move developments to state-owned companies. If it should become necessary again they will repeat the process.
Besides that, new Hukou regulations are planned to encourage rural migrants to move to urban areas with housing oversupply.
> they can figure out their chip and jet turbine problems (still not solved, they can't make fast chips economically yet, or even expensive ones without western equipment)
China can produce 65nm chipmaking gear domestically which is like 20 years behind the West. Even if they develop at twice the speed, this means in 10 years they will be where the West is today.
The question is rather, can the West keep the rate of progress? ASML has already warned that lost business from sanctions will impact their ability to invest in R&D.
Rural migrants can’t afford $1 million for a one bedroom flat in Shanghai or Beijing, or a $2-300k one bedroom in a tier 88 city. This bubble is going to pop, and real estate in China will stabilize to more affordable Japanese housing prices (well, that’s my prediction).
Just letting the real estate companies fail isn’t going to much, everyone knew Evergrande was doomed back in 2012 when that trader in HK was banned for shorting it.
Many many unrest cases showed, that with proper oppression methods the country can go for decades afterwards. Gulags and closed psychiatric clinics were full of unstable elements trying to destabilize countries. And that was possible without modern observation methods.
you know that The United States leads the world in total number of people incarcerated, right? the consumerist Gulag isn't less gulag than the soviet one.
>a company like Intel can't be spun up/replaced on anything less than even more subsidies and probably 10 years of nondelivery/noncompetitiveness.
As a taxpayer I sincerely couldn't care less, I'm fucking tired of seeing my tax dollars wasted on bailouts and subsidies for nothing. If we absolutely must use tax dollars on Intel at this point, I have a hardline requirement: Nationalize them. I want fucking tangible assets, things of fucking value for my tax dollars spent. I want them to become Public Property if they want to spend Public Money. I want them answering to the accountability of the Constitution and the electorate for wanting my tax dollars so desperately.
>This is a top-line chip fabricator,
No, they are not. If they were, none of us would be having this conversation.
No, it is not. Not when we (Intel) are already defeated and the battle decided. Not when allies (South Korea, Israel, Germany/EU, et al.) have actual top-line silicon production. Also see next.
>Identify the process nodes desperately needed for economic protection ... We need state of the art,
No, we do not. Most of the country, let alone the world, still runs on 50+ year old silicon technology. Not even the military uses "state of the art" silicon, they're almost always at least 10 to 20 years back from the bleeding edge if not more.
As for the silicon we all actually need and use? We can produce plenty of them. See: Texas Instruments (includes former National Semiconductor), Analog Devices, Onsemi (includes former Fairchild Semiconductor), and more.
No, we do not need Intel for national security, nor even economic prosperity for that matter. The American semiconductor industry is much more massive than Nvidia, AMD, and Intel.
>I cannot believe Intel has failed at integrated graphics for so long.
Intel's iGPUs have been and are the best iGPUs on the market. They almost always work everywhere everytime for all practical purposes. It's their discrete GPUs which have been and always were disappointing, I'm not holding my breath that Battlemage can defy history.
I'm honestly surprised we haven't seen activists clamoring for this board to be replaced. Maybe it's too late for Intel and nobody has the stomach and stamina to try to turn it around when there's easier money to be made in a very favorable environment. Or maybe it's too early and an activist is indeed slowly buying up a position but hasn't hit the threshold after which they must disclose their stake.