Failed dinner consolation prize
Perhaps the oval office photo op and announcement was done to make up for BK first setting up a dinner at his home for then candidate Trump then being forced to cancel it due to the outcry in silicon valley. BK as one of the few Trump supporters in the valley will be expecting some payback in the form of tax and regulatory easements that were hinted at during the announcement today.
Fab 42's long rumored resurrection
After being put in "mothballs" several years ago it was only a matter of time before an appropriate use would be found at an appropriate time. With 10NM firmly in Israel it makes Fab 42 an easy choice for 7NM. When you add to the decision making process and the advent of EUV tools at 7NM or 5NM which require boatloads of electrical power along with gigantic, very expensive cranes to hoist the huge tools into the Fab, the only place that makes sense is Fab42 for 7NM. So the reality is that this was going to happen any way but Intel wanted to get some free political capital out of it
When is a dollar not a dollar?
When its part of Intel's Capex plan....
We have heard from many suppliers and tool makers in the semiconductor industry that are wondering who is getting all of the alleged spending on Capex from Intel. The numbers just don't seem to add up. Intel's announced Capex over the last couple of years does not seem to be proportionately translating into dollars spent at suppliers. Its almost as if $1 announced by Intel translates into 50 cents spent in real money. Its almost impossible to accurately measure this but our anecdotal evidence points to less spending than announced. Part of this may be "sandbagging" by management to make it easier for Intel to hit its financial targets but even still theres a mismatch.
We have heard from a number of suppliers in the industry that Intel is not only no longer number one in spending, a title it lost long ago, but doesn't even make it into the top 3 or 4 spenders anymore at many vendors.
Not all $7B goes to the US
Given that the bricks and mortar are all done at Fab 42 and all that is needed is equipment move in we can assume that the $7B is all equipment. If we subtract spend on ASML, TEL, Hitachi and all other foreign vendors its likely that less than $5B actually "stays" in the US
Intel probably still spends more overseas than in the US on Capex
If we look at Intel's global footprint of fabs, especially the near term spend in Israel and China, the $7B spend in Fab42 , especially when spread over several years it is in the minority. I am sure that BK could stand next to China's Xi Jinping, in the equivalent of their oval office in China, for a similar photo op and claim a similar, if not larger amount of money that will be spent and jobs that will be created for memory production in China by Intel. We are also sure that Intel got some sweet political deals there as well.....
Intel the stock
We view today's announcement as not impactful either way for shareholders of the company, but we do applaud Intel's ability to work both political sides of China versus U.S. and H1B versus foreigner bans. Intel hasn't given up anything it would not have done anyway and in return it gets an IOU with Trump at a time when silicon valley is in open revolt against the new administration.
Maybe BK read "The art of the deal".....