Interesting Opinion on the CHIPs Act and Corporate Buybacks

[Daniel Nenni]

Great perspective on the road to the CHIPs Act and building a white elephant:

"The U.S. Senate has approved $52 billion for the CHIPS for America Act, aimed at reviving the American semiconductor industry over the next decade. While the Act awaits approval in the House of Representatives, we should examine whether it is the most effective way to encourage investment in domestic manufacturing."

"Intel lags behind TSMC and Samsung in process technology in part because of a swing toward buybacks, according to Lazonick. While Intel spent $50 billion on capital expenditures and $53 billion on R&D during the past five years, it also lavished shareholders with $35 billion in stock buybacks and $22 billion in cash dividends, which altogether used up 100 percent of Intel’s net income. Intel’s distributions to shareholders have been far greater than those made by either Samsung or TSMC, according to Lazonick.

Like Intel, IBM also decades ago focused on maximizing shareholder value. After drastically cutting headcount during the 1990s, IBM began distributions to shareholders in the form of buybacks, even as from 1996 through 2020 the company increased its annual dividend payouts. IBM did $51.4 billion in buybacks (79 percent of net income) in 1995-2004 and $119.7 billion (93 percent) in 2005-2014.

IBM could have invested those funds in state-of-the-art chip facilities, but, in 2015 sold its semiconductor fabs to GlobalFoundries. From 2010 through 2014, IBM did $70 billion in buybacks (92 percent of net income) which followed $50 billion in buybacks in 2005-2009 (93 percent of net income)."

https://www.eetimes.com/with-chips-act-us-risks-building-a-white-elephant/

 

[soAsian]

Great perspective on the road to the CHIPs Act and building a white elephant:

"The U.S. Senate has approved $52 billion for the CHIPS for America Act, aimed at reviving the American semiconductor industry over the next decade. While the Act awaits approval in the House of Representatives, we should examine whether it is the most effective way to encourage investment in domestic manufacturing."

"Intel lags behind TSMC and Samsung in process technology in part because of a swing toward buybacks, according to Lazonick. While Intel spent $50 billion on capital expenditures and $53 billion on R&D during the past five years, it also lavished shareholders with $35 billion in stock buybacks and $22 billion in cash dividends, which altogether used up 100 percent of Intel’s net income. Intel’s distributions to shareholders have been far greater than those made by either Samsung or TSMC, according to Lazonick.

Like Intel, IBM also decades ago focused on maximizing shareholder value. After drastically cutting headcount during the 1990s, IBM began distributions to shareholders in the form of buybacks, even as from 1996 through 2020 the company increased its annual dividend payouts. IBM did $51.4 billion in buybacks (79 percent of net income) in 1995-2004 and $119.7 billion (93 percent) in 2005-2014.

IBM could have invested those funds in state-of-the-art chip facilities, but, in 2015 sold its semiconductor fabs to GlobalFoundries. From 2010 through 2014, IBM did $70 billion in buybacks (92 percent of net income) which followed $50 billion in buybacks in 2005-2009 (93 percent of net income)."

https://www.eetimes.com/with-chips-act-us-risks-building-a-white-elephant/

its too common in American Corporations. a company became super dominate in its industry with no more mountain to climb. it became slow and start to shower investors with money.

i'm a Microsoft shareholder since 2008. Microsoft also have the same problem.

steve ballmer is a good sales man with no vision. he didn't see the rise of mobile phone and act too late thus lose that market forever. (Windows run on mobile phone way before IOS or Android). he did two things that bring back Microsoft. he push Microsoft into cloud computing and appoint Satya Nadella for CEO. i look at my Microsoft shares goes from $20 to $300+. i wish i have bought more.

lets see if Pat can turn it around.

 

[Staf_Verhaegen]

I don't think the focus on shareholder value is the cause for the Intel problems on process. I'd rather think it's that they had to focus on that because of the production problems in newer nodes.

 

[hist78]

I don't think the focus on shareholder value is the cause for the Intel problems on process. I'd rather think it's that they had to focus on that because of the production problems in newer nodes.

@Staf_Verhaegen,

I remember (hope my bad memory doesn't mess up this time) you know India's semiconductor industry very well. Is there any new developments about the India government project to recruit international semiconductor players to set up fabs in India? Thanks.

 

[Staf_Verhaegen]

@Staf_Verhaegen,

I remember (hope my bad memory doesn't mess up this time) you know India's semiconductor industry very well. Is there any new developments about the India government project to recruit international semiconductor players to set up fabs in India? Thanks.

I'm afraid your bad memory has messed up this time. I am not very familiar with India's semiconductor industry. Just had a few discussion with some India's (big) design service companies in my previous and has a few Indian people working at imec where I was working til a few years ago.