In 2022, Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) co-authored an amendment to the CHIPS and Science Act that would have required semiconductor companies seeking grants for domestic plant construction to give the government warrants, stock equity, or senior debt in the company. The idea was to ensure that the grants were used in the best interest of the public as intended, rather than chip companies essentially leaking them out to shareholders or as executive compensation.
The amendment failed, but fast-forward three years and Donald Trump’s government has taken a 10 percent equity stake in Intel, one of the biggest beneficiaries of the CHIPS Act. Trump said the equity stake was a conversion of the grant, and Sen. Sanders, at least, was supportive of it. So what does his co-author of the amendment, Sen. Warren, say about the Intel stake?
In a letter to Commerce Secretary Howard Lutnick released today and obtained exclusively by the Prospect, Warren blasts the Trump administration for substituting the equity stake for all of the other specific terms Intel was required to follow to ensure they were making good use of the CHIPS Act funds.
“Intel is a failing company,” Warren wrote to Lutnick. “After spending years focused on chasing short-term profits at the expense of long-term investments in its competitiveness, the company’s share price fell 60 percent last year. Yet the President has handed billions of dollars to Intel, with no meaningful strings attached.”
The split between Sanders and Warren on their approaches to Trump’s Intel gambit reflects a key difference between assessing Trump’s actions in theory and assessing them in practice. As Sen. Warren says, in theory she could support equity stakes, but not ones that absolve the company of having to do anything for the betterment of the public. In effect this gives the government a tip for a kind of financial engineering, focused solely on the stock price rather than a better product or worker empowerment.
The CHIPS Act terms for grantees were not perfect: A recommendation to improve child care options for workers was more like a check-the-box exercise, for example. But it did have some safeguards in place. In exchange for $8.5 billion in grants for fabrication factories (or fabs), Intel agreed to a project labor agreement for construction of one plant in Ohio, which offers union-level wages, and rolled out majority-union crews to build two other plants in Arizona and Oregon. It put $100 billion of its own investment into the new fabs and agreed not to issue stock buybacks for five years to ensure that profits were not leaked out to shareholders. It contributed $150 million to union apprentice programs at all of its job sites receiving funding, created a backup discounted child care program for workers, and increased reimbursement for child care. And an excess profits provision allowed the government to take a portion of any profits over a certain threshold.
“What were the strings there for? They were there to say, if you’re going to take taxpayer money, you’ve got to make sure that the thing you are producing is our best effort to make it benefit American taxpayers, good jobs, revitalizing the economy, creating a meaningful supply chain that’s onshore,” Warren said in an interview with me for a forthcoming episode of the podcast I co-host, Organized Money.
“The President has handed billions of dollars to Intel, with no meaningful strings attached.”
But when the CHIPS grant to Intel was converted into the government equity stake, the terms of Trump’s deal nullified all of this, as Intel’s own Securities and Exchange Commission filing about the transaction makes clear. “The DOC (Department of Commerce) has agreed that to the maximum extent permissible under applicable law, the Company’s obligations [under the CHIPS Act] will be considered discharged,” the filing states.
That means no guarantees on union neutrality, apprenticeship investments, excess profit shares, or even stock buybacks. The fabs supported with U.S. dollars don’t even have to be constructed in America. “Maybe Intel builds over here, maybe they build in Vietnam,” Warren said in the interview. “Maybe they hire labor that’s, unionized, maybe they pay the cheapest people they can find … In other words, they act like any other damn company that just has money to invest.”
Unlike the “golden share” agreement with Nippon Steel, where the Trump administration claims to retain the ability to dictate factory operations and prevent offshoring, the government gets no board seat or voting shares in the Intel deal. “The DOC must vote any shares of common stock held by it in favor of the nominees of and any proposals recommended by the Company’s Board of Directors, and against any other nomination or proposal not recommended by the Board of Directors,” the SEC filing indicates.
With no say in how the company will be run despite being the largest shareholder, the only real value the government gets from Intel is the potential for stock appreciation. And as Sen. Warren says in the letter, Intel is not a great bet. “Intel’s stock lost 60 percent of its value last year, and its new CEO has revealed no plans to turn the company around beyond cutting jobs,” Warren writes. “The company is suffering from declining revenue, missed business opportunities, and a struggle to operationalize new manufacturing processes.”
Indeed, Intel gets little to no assistance with the monopolization of high-end chips between Taiwan Semiconductor Manufacturing Company (TSMC) and Apple, nor does the government upend a board that has made a series of shortsighted decisions, failing the public and its own investors. The government could still end up happy with the deal if Intel does big dividend or buyback payments to investors, since it has the most shares. But how would that be a good deal for the public?
Warren asked the Commerce Department a number of questions about the Intel deal, including who negotiated the deal, what authority Trump had to take the equity stake, whether Intel is correct that they were discharged of their obligations under the CHIPS Act, whether Intel can do dividends or buybacks, and how taxpayers are protected if Intel’s stock drops.
I asked Sen. Sanders’s office if they had a reaction to the actual deal Trump made with Intel, rather than the concept of an equity stake in a company receiving a government grant. They have not yet responded.
The lesson here is that you have to assess deals on the merits rather than whether they fit into a particular populist box. Since Trump has vowed to do many more of these equity deals, we’ll have that opportunity to assess in the future. I don’t think that will come out much better.