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A few months ago, I started buying stock in Intel, betting that the company would become a monopoly chip manufacturer outside Asia. Whether you know it or not, you’re betting on Intel too.
Here’s why.
U.S. culture depends on the advance of technology. The largest and most advanced companies in the U.S., and even our military superiority, depend on access to the most advanced semiconductor chips in the world.
Nobody can compete with the U.S.’s software programmers and platforms, but the most advanced chips come from one place — and it’s not a terribly secure place. That’s right — it’s Taiwan, an island with a population of 23 million that sits just about 100 miles away from a giant country that covets it.
Meanwhile, Commerce Secretary Gina Raimondo has been rightfully pointing out that the U.S. buys 70% of its most sophisticated chips from Taiwan. And those chips are used in military equipment — a national security issue.
Meanwhile, many of our devices rely on advanced chips made by Taiwan Semiconductor
TSM,
and, to a lesser extent, Semiconductor Manufacturing International (SMIC). Apple
AAPL,
and Android or any other devices that run chips from Qualcomm
QCOM,
Nvidia
NVDA,
or AMD
AMD,
Cars from Tesla
TSLA,
and other makers rely on chips made outside the U.S.
So what is to be done?
Well, Intel’s
INTC,
already getting help from the government through the CHIPS Act, and I think that’s a good first step. To be sure, I have been consistent about being anti-corporate welfare. That includes fighting against bank bailouts, TARP, auto bailouts, state subsidies, local subsidies, loopholes and other target tax tricks for giant corporations.
But if there were ever a time that I thought the government should subsidize a giant corporation, it would be now, in the name of national defense, in helping Intel cover an investment tab that will go well over $100 billion in the next 10 years to make the U.S. and Western Europe competitive against Taiwan and SMIC.
As it stands, China’s own domestic chip-fabrication company, SMIC, has already caught up to Intel on chip technologies.
Over the past few weeks, China’s military has been moving ever closer to Taiwan. China blockaded Taiwan — and therefore Taiwan Semi’s chips — for days at a time in the past couple of weeks. Maybe China’s government thinks their own technology — software and chips — is advanced enough now that their military doesn’t have to kowtow to American might. Maybe they feel they have no choice but to stop those Taiwan Semi chips from getting to the U.S. military, which will then turn around and send advanced military equipment to Taiwan. Whatever the reason, the threat of losing access to the most advanced chips in the world because China shuts off access to Taiwan is real.
The Redomestication Of The Supply Chain Revolution, as I call it, was already in full effect and starting to build over the past couple of years after escalating trade tensions, then tariffs, then Covid, then the Russia/Ukraine war, all built into a Great Supply Chain Crisis that has even Fruit of the Loom trying to domesticate its supply chain. Soldiers need underwear, but it’s not undies that will define economic and military superiority in coming decades — it’s software and chips.
And the only way the U.S. and Western Europe can possibly keep up with China/Taiwan/South Korea five, 10 years from now will be to have access to the most advanced chips. And the only company in the U.S. and Western Europe that has the ability and potential to make the most advanced chips is Intel. Taiwan Semi has plans to build its own advanced chip fab in Arizona, but remember that if China were to take over Taiwan, it would own that factory by default.
So whether you realize it or not, whether you own shares of Intel or not, you too are betting on Intel.
The good news for Intel investors is that if the company pulls this off and the U.S. remains dominant technologically — and therefore economically and militarily — Intel will basically be a monopoly in the West. It could possibly become the most valuable company on the planet.
And if they don’t? I’m not sure your stock in Coca-Cola
KO,
General Electric
GE,
or Honeywell
HON,
is going to be worth much anyway.
So I have made Intel a large position, and I’ve nibbled a little more as its stock has gotten down toward the $30 level.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.
