Nations rise when they have pioneering entrepreneurs. And when those entrepreneurs become dominant, they demand concessions from governments, and in the process “tax” the citizens, for providing services which are critical and catalytic. I have called that “conglomerate tax”, a tax citizens pay to some of the leading companies in the world to serve them!

As noted in the press release, the Basing Authority will provide the land. That means Dangote Group will not have to pay for it. There is nothing wrong with that. He is investing to provide food security, provide youth employment and also improve the communities. That is what conglomerates do because they are the best creators of jobs, at least in short terms. While the state can plan to sell the land and invest the proceeds in startups, it may take years before those startups can generate the kind of employment and economic activity a conglomerate like Dangote can deliver in a year. For having that capacity, conglomerates tax nations. In other words, you have to subsidize their businesses through government supports for them to help you fix your pain points like unemployment as a government. They operate at the upstream level where the pain points are massive in the operations of governments. Their reward is Conglomerate Tax: the subsidization of their business operations due to their capabilities to help support government initiatives at scale.

Please note that Conglomerate Tax  is a global thing. U.S. government may waive taxes for GE but will not listen to Facebook because GE is a conglomerate. They are treated differently because they technically build nations. Government may have the money but may also need a special plastic for a new warplane. There are few companies that can deliver such products. So, a government may engage a company like GE to research and develop the plastic. The company can ask for concessions to take that risk. Those concessions are taxes to nations since the nations must still buy the plastics if the conglomerate succeeds.

Yes, Conglomerate Tax is global for Dangote Cement, Amazon, GE, etc and it remains “the subsidization of their business operations due to their capabilities to help support government initiatives at scale.”

Today, we are reading that Biden’s government will provide $10 billion to enable Intel to decouple America from the risk of foreign semiconductor products: “In a concerted effort to bolster domestic semiconductor production, the Biden administration is engaged in discussions to allocate over $10 billion in subsidies to Intel Corp, a move motivated by the industry’s escalating significance in powering critical technologies across various sectors.

“This development, reported by Bloomberg News on Friday, reflects a strategic maneuver aimed at fortifying the United States’ semiconductor capabilities amidst global supply chain disruptions and geopolitical tensions.”

From cheap FX dollars to waived import duties to many other things, nations apply special goodies to conglomerates, because they have accumulated and compounded capabilities, to help governments pursue their missions. Yes, Intel is helping Biden’s government on its Made in America initiative and Intel will get $10 billion goodies. And that is why you must not be annoyed when Dangote Cement gets goodies you cannot access in your small Ovim store. It is what it is!

Biden Administration Negotiates $10 Billion Subsidy for Intel to boost domestic Semiconductor production

In a concerted effort to bolster domestic semiconductor production, the Biden administration is engaged in discussions to allocate over $10 billion in subsidies to Intel Corp, a move motivated by the industry’s escalating significance in powering critical technologies across various sectors.

This development, reported by Bloomberg News on Friday, reflects a strategic maneuver aimed at fortifying the United States’ semiconductor capabilities amidst global supply chain disruptions and geopolitical tensions.

Sources familiar with the matter revealed that negotiations are ongoing, with Intel’s award package expected to encompass both loans and direct grants, aimed at revitalizing and expanding the American semiconductor industry.

The US Department of Commerce, entrusted with overseeing the disbursement of funds under the CHIPS Act, has refrained from confirming or denying the reports, maintaining a diplomatic silence amidst the sensitive negotiations. Similarly, Intel has opted to withhold comment on the ongoing developments.

The proposed subsidy to Intel aligns with broader initiatives outlined by the Biden administration to bolster the semiconductor sector, which plays a pivotal role in driving technological innovation, economic growth, and national security. Under the auspices of the $39 billion semiconductor program, the Department of Commerce has already unveiled two smaller grants, signaling a concerted effort to invigorate semiconductor manufacturing capabilities within the country.

Commerce Secretary Gina Raimondo’s earlier announcement regarding the imminent allocation of several funding awards denotes the urgency and commitment of the US government to strengthening domestic semiconductor production.

The semiconductor fund, a cornerstone of the government’s strategy, seeks to catalyze chip production and related supply chain investments, with a particular focus on building new factories and enhancing production capacities.

Intel, a stalwart in the semiconductor industry, has outlined ambitious plans to invest tens of billions of dollars in chip factories across various states, with a notable emphasis on a groundbreaking new site in Ohio, potentially positioned to become the world’s largest chip plant. However, recent reports hint at a potential delay in the completion of the Ohio facility until 2026, citing market dynamics and the gradual influx of federal funding as contributing factors.

Amidst the discussions surrounding federal subsidies, Nvidia has emerged as a key player in the semiconductor industry, reaching a market cap of $1.79 trillion. The California-based company has experienced significant growth and prominence in recent years, driven by its cutting-edge graphics processing units (GPUs) and contributions to artificial intelligence, high-performance computing, and data center technologies.

Further under the CHIPS Act, GlobalFoundries, a pivotal domestic semiconductor manufacturer, is poised to receive a substantial portion of the federal subsidy, as outlined in a preliminary agreement. The funding is earmarked for three projects, including the establishment of a new fabrication facility in Malta, New York, and expansions at existing sites in Malta and Burlington, Vermont.

Lael Brainard, director of the White House’s National Economic Council, emphasized the strategic importance of such investments in bolstering national security and technological prowess, noting the multifaceted significance of semiconductor investments in driving economic resilience and innovation.

“Today’s investment will protect our national security by expanding domestic production of chips used in technology such as satellites and space communications,” Brainard said on a call with reporters.

Senate Majority Leader Chuck Schumer hailed the announcement as a significant milestone for New York State, highlighting the anticipated job creation and economic benefits.

The projects are expected to create thousands of manufacturing and construction jobs over the next decade, contributing to the revitalization of local economies.

As semiconductor manufacturers gear up for a rebound in the industry, GlobalFoundries’ strategic upgrades underscore the anticipation of a future growth trajectory, further corroborated by projections indicating a double-digit growth in semiconductor sales for 2024.

While the negotiations surrounding Intel’s potential subsidy mark a significant step in strengthening domestic semiconductor production, the broader implications extend to reinforcing supply chain resilience, mitigating geopolitical risks, and fostering technological innovation.

The Chips Act was passed by Congress in 2022. The initiative responds to concerns regarding global supply chain vulnerabilities, production expenses, and geopolitical risks, particularly those related to Taiwan. Concurrently, tensions between the United States and China over technology are escalating as the 2024 presidential election approaches.

With ongoing discussions and investments, the semiconductor industry is poised to play a pivotal role in driving economic growth and innovation in the United States. The main goal of Washington is to boost domestic production, covering the edges that China could leverage to beat its sanctions. Analysts expect more companies like Nvidia to emerge in the industry in the near term.