From EVs to hypersonic missiles, the US is losing the high-tech arms race. In an effort to compete with Chinese state capitalism, Trump is intervening in the economy with an even heavier hand than his predecessors.
Last month, the US government acquired a nearly 10% stake in Intel. In exchange, the government granted Intel immediate access to $8.9 billion promised by Biden’s CHIPS Act. Trump, like Biden before him, is attempting to prop up the nearly 60-year old chip manufacturer which has fallen far behind its international competitors. Within weeks of the move, Nvidia bolstered the struggling tech giant with a $5 billion investment.
Strategic industries
This is only the latest in a series of government interventions in the economy. After 18 months of negotiations, Japanese-owned Nippon Steel bought US Steel in June. Biden had blocked the sale, fearing foreign control over the strategic industry. Trump changed course, permitting the $14.9 billion deal in exchange for a seat on the corporate board and a “non-economic golden share.” The highly-touted share allows the government to veto certain corporate actions, including closing plants and shipping jobs overseas.
In August, Nvidia and AMD, major players in the semiconductor arms race, struck a deal to reverse Trump’s ban on exporting advanced chips to China. In exchange, the US government will get a 15% cut of all sales. Trump about-face could swell federal coffers by some $2 billion.
That same month, the recently rechristened Department of War acquired a 15% stake in MP Materials, owner of America’s only operational rare earth mine. Trump sought to attain rare earth magnets from the Congo, Greenland, and Ukraine, but it’s an uphill battle when China controls 90% of global supply. As MP Materials’s largest shareholder, the War Department now has an option to invest another $350 million on top of the $150 million loan it provided to expand operations.
Trump is pledging to make “many more” deals like this.
A step towards socialism?
Senator Rand Paul denounced the Intel move as a “step toward socialism.” It’s nothing of the sort. The American state is intervening in the economy not to end the exploitation of the working class, but to ensure that American imperialism can continue to dominate the globe.
$8.9 billion isn’t game changing in the semiconductor industry. On average, it costs TSMC $20 billion to construct a single “fab” producing 25,000 silicon wafers per month. Barring massive state expenditure, the US won’t be able to create a competitive “homegrown” chip manufacturer. Declining US capitalism requires the massive capital investment potential of the federal government to keep up in the high-tech arms race.