"Stock buybacks are a form of stock manipulation" - not really, they're a means of returning money to the shareholders while bypassing taxes on dividends.
(Not an expert on the US tax system as I'm a Brit, but it seems that the tax treatment of dividends depends on how long the stock is held, and can be taxed at income tax rates, while stock buybacks result in inflating the stock value which is always CGT. Not sure what the tax treatment is for institutional investors?)
NB that "returning money to the shareholders" is ultimately what companies are for, and we should completely expect them to do this because without it investors wouldn't invest in the first place. It's infinite zero-dividend growth that's weird (Amazon).
No one needs $8 billion in subsidies. But that’s how we run the United States now. There’s no longer comprehensive legislation trying to solve a particular (perceived) problem. Instead we just drop money from the sky on various people and companies.
There’s a pandemic? Quick, cut 80% of the country a check.
The childcare industry is structurally understaffed and unprofitable, let’s just cut them all checks!
Higher education keeps on growing to larger and larger percentages of GDP? That’s okay we’ll just cut checks blank tuition checks and then forgive all the loans.
China is signaling that it might invade Taiwan. That’s a tough one. Hmm. I got it, let’s cut a check to semiconductor manufacturers!
If Intel is so important to national security, it should be nationalized. If Intel is not willing to willingly invest into U.S. manufacturing, it can be targeted with tariffs. A corporate handout by the taxpayer is not what should happen, though. And yes, stock buybacks are a form of market manipulation. That's why they were banned before Reagan.
Funnily enough, SEC unbanned stock buybacks by using the Chevron deference, which is currently being challenged in courts. EPA being unable to regulate climate change might be offsetted by a minor win of making SEC not ignore law anymore by asserting its legitimacy.
Because without it they will build somewhere cheaper to operate and then U.S. doesn’t have a fab if/when China absorbs Taiwan.
It’s not that difficult of a concept. And no, like others will inevitably suggest you can’t just legislate a multinational company to build its facilities onshore because you need them to. If you need something from a company you make it worthwhile, which is what’s happening here.
Stock buybacks are just a form of dividends. It's still subject to taxation via capital gains tax.
Subsidy is just a way to create an incentive for Intel to build manufacturing facilities in the US. It's not paid because Intel lacks funds, but to ensure that factories are built in the US and not elsewhere. Intel can do whatever it wants with the money received from subsidies, provided it fulfills its obligations.
Jobs aren't particularly important in this schema, but they are a nice talking point for politicians to show that at least part of the money paid via subsidies will return to American workers.
It doesn't need it, it's simply in a position where it can get it. From their perspective it's free money.
It's the same situation with car manufacturers, they do this all the time. They get massive subsidies (usually in the form of permanent tax breaks) by pitting the governments of prospective factory sites against each other.
(It's actually a form of the prisoner's dillema: governments would benefit in the net if no-one offered these subisdies, but the prize for defecting is just too great so someone always does.)
Somebody correct me if I'm wrong.
I always thought of "stock buybacks" as a form of "debt payment". Stocks are created by companies out of thin air, as a tech worker I am (partially) paid in stocks. Those stocks aren't purchased by my company on the open market, they are manifested -- diluting shareholder stock.
Buybacks put a payment on that "loan". I doubt people would be so up in arms about companies paying off their debt, even prematurely. The number I'm more interested in is total stock buybacks / total stocks issued, which of course is never reported.
Am I wrong here?
That shows the dominance of the financial market and the economic power over the structures of society. We find completely normal hundreds of billions be redirected to the owners of the capital but we would find an anomaly to think of a technological project that could bring real progress and costed that much.
$152B in buybacks and the stock is still not trading high. Still not interested. Feels like Intel is basically at the GE stage of impending decline due to over corporatization.
Sites like commondreams (and their conservative counterparts) should just be blacklisted from being posted here.
Seriously, it's hyper-partisan ideological brain damage material solely meant to foster clicks and outrage.
US wants me fabs in-house. For company, Korea/Taiwan or Israel may make more sense. So, US is paying up for it.
Between 1998 and 2018, Boeing spent more than $61.0 billion in stock buybacks. The budget for the development of the MAX was US$4 billion
title manipulation
original title is: "Intel Brags of $152 Billion in Stock Buybacks Over Last 35 Years."
Current HN title made me think that they plan to spend $152 b on buyback in the future
> Intel CEO Pat Gelsinger hauled in $179 million in 2021, most of it coming from stock-related compensation.
When I see statements like this, I know to stop reading.
No he didn't make $179M. He was awarded PSUs that will mature only if Intel stock hits a certain price (in a window of N years). Not only did it not hit that price, it has been down considerably. The grants will likely expire before Intel's price hits those goals (I think the lowest target is in the 80 dollars).
His actual compensation that year? About $10M - quite a bit of it being a sign on bonus.
Here's an unpopular opinion: If the US government - or some European government for that matter - wants companies to start building semiconductor fabrication plants within their borders they should not start offering them carrots like this $8B subsidy, instead they should:
- go lighter on the sticks of onerous environmental regulations
- do their best to recreate an academic culture which centres around competence and expertise instead of political indoctrination and activism
It is not likely to be a lack of money which keeps these plants from being built there, it is the threat of being buried in regulative paperwork and the decade of delay which that comes with because of some critter being found living on the plot where the plant is to be built. It is the regulations around the use of all the nasty chemicals involved in semiconductor fabrication which make it more profitable to build those plants elsewhere. Also, it is the fact that many western universities have been or are in the process of being captured by political activists who turn these institutions from seats of learning into agitprop factories where merit takes a backseat to unalienable characteristics like race, sex and sexual orientation.
Given that we here in 'the west' insist on having access to the products of these factories I'd say it is more than hypocritical to insist these be manufactured elsewhere because doing so here is too damaging to the environment and the people working in those factories.
It doesn’t. It needs to go into liquidation when the money men have finally driven it fully into the ditch.
Seems to me that the CHIPS act doesn't go far enough to build up domestic competition.
What would be the consequences if the government nationalised / heavily subsidised Intel ramp up domestic chip production? Or split Intel up to create new national champions?
This state intervention seem to be working out well for China in electric vehicles and solar. The US risks squandering its technological advantage by pursuing half way measures.
It doesn't need it, it wants it in exchange for setting up fabrication capacity in the U.S, where it would otherwise be uneconomical to do so.
The subsidy isn't economic stimulus it's done in the name of national defense. The chip shortage of a few years ago hampered production of many industries including military. The money is to accelerate domestic chip production because we actually just need the chips.
Intel doesn't need 8 billion, Uncle Sam needs to onshore the manufacturing of a strategic resource before the Chinese unification war.
Doing it themselves would be silly when you can direct the market to do it for you.
I don’t think that this is surprising at all.
Stock buybacks are undertaken as the return the company can get on the cash returned is lower than they think shareholders want.
Subsidies exist to get the company to invest in a project where the return would otherwise be inadequate for shareholders.
I suppose you could force a company to invest in a project that was perceived to have inadequate returns but that seems a little unfair?
Lot of talk about trivia. A billion here, a billion there, it doesn't add up very fast in a trillion-dollar budget.
Let's talk about important things instead. Like defense, or infrastructure or schools. Not dropping nickels into Intel's tin cup so they'll do what we want. That's business as usual -spending govt money to get things done is pretty much all it's for.
What a low quality article, the author doesn’t even know what a stock buyback is and struggles to even explain it to the reader.
Important to note that the last buyback was in June 2021.
https://ycharts.com/companies/INTC/stock_buyback
They need subsidies because the US and Europe can't afford to have all leading edge chips manufactured in Taiwan and South Korea.
I don't mind the US govt giving $8B to build out a US based fab. I mind when the US based fab doesn't get built or is just built for show but can't churn competitive chips.
Both Boeing and Intel are showing their incompetence. US should give Nvidia $8B to build their AI GPUs on US soil.
Can high end silicon products put under export control?
I think that’s what the US government does for commercially vital resources. It might also as a side effect, force the production on the US soil as well.
The author seems unaware that 1990 was 34 years ago.
I'm not justifying or excusing Intel, and the subsidy is insane, but "Intel did things over the past 3 and a half decades" isn't a point.
Because if the US doesn’t, Intel can go elsewhere. The problem with fabs in US is well documented. We simply do not have the necessary skilled labor.
I think I'm on the other side of this argument. The US operates a fairly laissez faire capitalist system. The US has decided that it wants to encourage chip production in the US. There are a number of ways to do this - you can put restrictions on imports, you can create tax cuts locally, or you can create federal initiatives to incentive companies to do more in the US. There are pros and cons to all of them, but it's important to understand the US isn't doing Intel a favour - there is something the US government wants - strategic capacity to produce high tech chips, and it's spending money in the open market to achieve that. It could have gone down the other routes, but there's good reason not to. You impose tariffs? Maybe Intel just decreases production, you create tax cuts? You get exactly the same accusations of state subsidy. But what's happening here isn't a subsidy, it's a transaction, Intel is delivering something the US government is willing to pay for.
If you can get "free" money from the state why not?
From the article:
>...Intel produces totally useless stock buybacks.
>the political establishment actually buys the corporate line that halting mass layoffs would make corporations uncompetitive, which is total nonsense... In Germany, the workers used their power to persuade Siemens management to agree to no forced layoffs...
In another article (Why Europe is a laggard in tech):
>Today, investment in tech research and development in Europe is only one-fifth of what it is in the US... Investment in AI is around 50 times higher in the US than in Europe. European tech is falling behind its competitors at an alarming rate. How did we get here? https://www.ft.com/content/d4fda2ec-91cd-4a13-a058-e6718ec38...
Reward investors - get more investment. Treat them badly get less.
They don’t. It’s literally a bribe to do something not in the company’s best interest.
Imho pretty stupid use of public funds. Somehow people don’t learn lessons from history, even recent history.
It's as if this person has no understanding of business or economics or the heart of man...... Subsidies/grants are given out to get a business to do something that isn't in the business' interest or is too low a probability of a high payout to be considered without what is essentially a bribe from the government. In this case, those grants are driving massive malinvestment in excess semiconductor fab capacity in locations and at capacity levels that currently don't make a lot of sense for said investment from a business perspective. They will only pay off if China gets uppity enough to wreck the Taiwan/Asian supply chain/production capacity. From a business perspective, overbuilding like that for the chance of China doing something stupid is foolish because you risk large losses as excess capacity kills your pricing ability and if the low probability event happens your existing capacity would be worth even more without the excess capacity you are building, which blunts the upside.
From the government perspective 8 billion in grants is a no brainer because it is driving a multiplier of investment (last I saw was around 100 billion) that will blunt the negative effects of China doing something stupid and ensure you maintain enough supply to handle military and some civilian semiconductor demand in that rare event.
That Intel buys back stock is irrelevant. They are doing that because it is in their shareholders self interest for them to do so, because the investment opportunities (i.e. the building more fabs the subsidy is inducing) makes less sense than just giving shareholders their money back in a tax efficient manner. In some sense all of this type of article is formulaic in its stupidity. It's always "Why aren't you guys doing communism/fascism/dictatorship?" to which the correct response that is never discovered in the article is "because the last few hundred years of history have shown us it works far better to let individuals make their own choices and reap the benefits and costs of doing so, as innovation is far higher in that system and economics can drive failure of ideas/businesses rather than political choices, which self regulates to a better outcome, as long as you deal with the monopoly corner cases with effective antitrust regulation."
Criticism and anti-criticism miss the point.
USG is worried about a monopoly chip provider becoming unavailable. So the solution is to find another monopoly chip provider?
USG should invest in a competitive semiconductor industry to break the monopolies.
I'm still fuzzy on why employee profit sharing is anathema.
Record profits and wage stagnation. For decades. Coincidence?
Imagine if just 5% of those buybacks went to employees. That'd be (more) fair, right?
Oh come on. Yes, Intel has huge revenues, because it produces physical goods that have high R&D and unit costs.
And yes, of course they returned money to investors in the last 35 years, they were a very successful company. You'd hope they try to remind people that they have a history of success! They've not done any buybacks since Q1 2021.
I don't understand. The only way this looks to free up the $8B for stock buybacks is if Intel was already going to invest in doing all of this already and specifically here.
Can they reallocate capital to stock buybacks if they were already going to do this, yes! Could I find anything prior to this bill to indicate any competitive reason for Intel to do this in the USA? No.
Article just reads as written by one who is anti-corporate, rise up and this is why one must be anti-work because the government only cares about lining the pockets of corporations.
Intel didn't get a subsidy because they're poor, the subsidy exists because the US Government wants the company to do something (setup a fab on US soil) that is not necessarily in the shareholders best interest (cheaper to set up a fab elsewhere). The subsidy is the difference in both parties judge to be the cost of doing the expensive thing (that matches US strategic interests) vs the cheaper thing.