:max_bytes(150000):strip_icc()/GettyImages-22156212511-a85bc8c790b24738a2cefc43ea242474.jpg "New Chip Deals Are Starting to Look More Sticks Than Carrots. What That Means for Chipmakers")
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Key Takeaways
- Commerce Secretary Howard Lutnick said the Trump administration is exploring how the U.S. could receive equity stakes in semiconductor companies with CHIPS Act grants.
- Such deals could extend to Micron, Taiwan Semiconductor, and Samsung, along with Intel.
- Though the Trump administration appears to have made inroads with embattled chipmaker Intel, Wall Street analysts suggested swaying others might require better terms.
- Chip stocks fell Wednesday, amid a broader decline in the tech sector.
Wall Street could be starting to sour on the terms of new deals in the works for chipmakers.
While investors first appeared sanguine about the White House’s steps to become more involved in chipmakers’ businesses in an effort to boost America’s manufacturing capabilities, analysts’ opinions have started to turn as more details about potential deal terms emerge.
The PHLX Semiconductor Index (SOX) fell close to 1% Wednesday amid broader tech losses, extending declines yesterday. Intel (INTC), Micron Technology (MU), and Taiwan Semiconductor Manufacturing Company (TSM), were among the biggest decliners in the index—the latest companies to land in policy crosshairs.
Commerce Secretary Howard Lutnick said in an interview with CNBC yesterday that along with Intel, the U.S. government could look to take equity stakes in other semiconductor firms in exchange for CHIPS Act funding. Those companies could include Micron, TSMC, and Samsung, according to Reuters.
The White House did not immediately respond to an emailed query about the development, nor did Micron, TSMC, and Samsung.
“We see this potential outcome as negative for the broader U.S. semi landscape and specifically bad for the companies that might be directly affected by this shift in policy,” Wedbush analysts Matt Bryson and Antoine Legault wrote in a Wednesday report.
The carrot could now appear to be more stick. Whereas the CHIPS Act, signed into law in 2022, incentivized chip production in the U.S. with funding, “changing these grants to ownership stakes effectively destroys this economic benefit,” Wedbush said. “Not to mention, such a result would necessarily be unexpectedly dilutive to shareholders of the affected firms.”
Bernstein analysts in a note Tuesday similarly observed that Intel giving up 10% of the company for money that was supposed to be “free,” albeit tied to some milestone-based requirements, “seems worse.” Though the Trump administration appears to have made inroads with embattled chipmaker Intel, swaying others might require better terms.
Relative to Intel’s CHIPS awards, grants given to Micron, Samsung, and TSMC are relatively smaller as a percentage of market cap, or roughly 4% or less, according to Bernstein. “If presented with such a bargain however, we wonder how many of these companies might simply just say ‘no.'”
