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--:-- Jessica Mendoza: Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza.
--:-- Ryan Knutson: [in the background] Hi, I'm Ryan Knutson.
--:-- Jessica Mendoza: For the past few weeks, Intel, the American chips company, has been on a roller coaster. Our colleague Robbie Whelan has been covering it. It's really been a wild and crazy ride, and I'm happy to tell you all about it.
--:-- Robbie Whelan: Thanks, Jessica. It started earlier this month with a post from President Trump calling for Intel CEO Lip Bhutan to resign over business ties in China.
--:-- Jessica Mendoza: That's right. The post said, "The CEO of Intel is highly conflicted, capital letters conflicted, and must resign immediately."
--:-- Robbie Whelan: Tan quickly tried to put out the fire, flying to Washington to meet with the president in the Oval Office. And they have this like hour-long meeting where he basically says, look, my ties to China are in the past.
--:-- Jessica Mendoza: About a week later, Intel announced a major deal with the Trump administration. Friday was like the culmination of a total rollercoaster ride for Intel.
--:-- Ryan Knutson: [in the background] And I said, I think it would be good having the United States as your partner.
--:-- Robbie Whelan: [laughs] Yeah, that's right. And they've agreed to do it. Under the agreement, the U.S. government becomes a partial owner of Intel. It's getting a 10% stake in the company.
--:-- Jessica Mendoza: And Robbie has the inside story on how it all went down. And President Trump, kind of like in a half-joking, half-serious way, said, maybe I should put my signature on these papers too.
--:-- Robbie Whelan: I've actually seen the papers. He put his name in big letters, Donald Trump. So he's very pleased about this. And I think it's a great deal.
--:-- Jessica Mendoza: He walked in wanting to keep his job, and he ended up giving us $10 billion for the United States. So we picked up $10 billion.
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--:-- Jessica Mendoza: Welcome back to The Journal. Behind the blockbuster deal granting the U.S. government a 10% stake in Intel, there is a whole cast of characters. It's a little bit hard to keep track of how many people are involved here, but would you want to hear the dramatist persona?
--:-- Robbie Whelan: Sure. The dramatist persona.
--:-- Jessica Mendoza: So, okay. So there's a cast of characters here that's very interesting and it involves some of the most powerful people in the world.
--:-- Robbie Whelan: There's Intel CEO Lip Bhutan. He's a Malaysian-born, Singapore-raised U.S. citizen, but he has some Chinese heritage and he's very close with a lot of businesses and a lot of officials in China.
--:-- Jessica Mendoza: There's, of course, President Trump. Just took office, wants to make American manufacturing great again, has this really specific America first industrial agenda that he's been pushing.
--:-- Robbie Whelan: And Howard Letnick, the Commerce Secretary. He's a former banker. He's one of Trump's most trusted deputies. And he is responsible for doing a lot of the deals that the president has been orchestrating.
--:-- Jessica Mendoza: And there's also Tom Cotton, a Republican senator from Arkansas. Who's been very vocally critical of China and the idea of us selling technology, especially technology that can be used in combat situations, to the Chinese.
--:-- Robbie Whelan: And he's been very critical of companies that do that.
--:-- Jessica Mendoza: For this story, Robbie and our colleagues at The Wall Street Journal spoke to current and former Intel executives, people in the White House, lobbyists, and company advisors.
--:-- Robbie Whelan: One of the things Robbie learned was this whole series of events started while Trump was watching TV On Thursday August 7th Donald Trump was doing a thing that he loves to do in the morning which is he watches his favorite cable news shows, and he gets a lot of ideas from these shows.
--:-- Jessica Mendoza: The show he was watching that particular morning is called Mornings with Maria. It's on the Fox Business Network. It's hosted by Maria Bartiromo.
--:-- Robbie Whelan: But look at intel and how far it has fallen. And Bartiromo is talking about Tom Cotton, the senator from Arkansas, and a letter he has recently written and made public to Intel's board.
--:-- Jessica Mendoza: Tom Cotton is pressing the board of Intel right now about its new CEO and his potential ties to Communist China.
--:-- Robbie Whelan: In Cotton's letter to Intel's board, he called out Tan's previous job as CEO of a company called Cadence Design Systems.
--:-- Jessica Mendoza: Earlier this year, Cadence pleaded guilty to selling banned technology to a Chinese national defense university.
--:-- Robbie Whelan: The company has since settled with the Justice Department. Those sales happened while Tan was CEO.
--:-- Jessica Mendoza: The president is listening. He's tuned in. And he hears this, and then if you look at the timestamps on it, it's really remarkable. Five minutes after this segment runs, he goes on to Truth Social, and he posts this really dramatic message.
--:-- Robbie Whelan: The message was that Tan should resign.
--:-- Jessica Mendoza: In a public statement about his previous company, Tan said, quote, we are engaging with the administration to address the matters that have been raised and ensure they have the facts.
--:-- Robbie Whelan: Trump's post came just five months into Tan's tenure as Intel CEO. It was also a time when the company was trying to come out of a longtime rut.
--:-- Jessica Mendoza: Intel is in what can only really be described as sort of a multi-year downward spiral. Intel has struggled to keep up with other chip giants like NVIDIA and Taiwan Semiconductor Manufacturing Company, or TSMC.
--:-- Robbie Whelan: While these chip companies decided to specialize in either designing chips or manufacturing them, Intel tried to keep doing both, and it lost an edge in both markets.
--:-- Jessica Mendoza: As a result, over the last few years, Intel's stock has plummeted, and it's lost out on billions of dollars.
--:-- Robbie Whelan: The company brought Tan earlier this year to try to right the ship. And so the hope, it sounds like, with Intel turning to Tan as CEO was that we need something to end this period of chaos.
--:-- Jessica Mendoza: And so five months in, when Trump calls for Tan to resign, I mean, what was the reaction?
--:-- Robbie Whelan: My understanding is it was full-blown panic. It was the board starts freaking out. He is very rattled by this.
--:-- Jessica Mendoza: They immediately reached out to Susie Wiles, the chief of staff at the White House, and said, look, we've got to talk to the president about this.
--:-- Robbie Whelan: The company set up a meeting with Trump just a few days later. And before that meeting, Tan strategized with his team.
--:-- Jessica Mendoza: And he's huddled with his advisors in this kind of state of frenzy and nervousness and anxiety.
--:-- Robbie Whelan: And he's getting this advice from them. They're saying, what should I do? How can I get the president to back off and stop criticizing me publicly?
--:-- Jessica Mendoza: Because you have to understand that a president, a sitting president, calling for a CEO of a major American company to resign in public is pretty unprecedented.
--:-- Robbie Whelan: So his advisors tell him, they say, listen, you've got to do two things. Number one, you've got to convince him you're not a Chinese spy, because that's essentially what you've been accused of.
--:-- Jessica Mendoza: And number two, you've got to convince him that it's in his interest long term to make sure that Intel does not fail and come up, come to some sort of arrangement where the government's fortunes and Intel's fortunes are tied together.
--:-- Robbie Whelan: And they say to him, you know, don't worry, he will hear you out. He might have called for you to step down. But President Trump loves talking to CEOs.
--:-- Jessica Mendoza: I mean, it's his world, right? That's Trump's world are CEOs and high-profile, like billion-dollar businesses.
--:-- Robbie Whelan: He envisions himself as this sort of master dealmaker. And he likes being around people who he sees as also smart dealmakers.
--:-- Jessica Mendoza: He thinks that they're of his tribe.
--:-- Robbie Whelan: And so Tan calms down a little bit and he understands what he has to do.
--:-- Jessica Mendoza: So Tan goes to the Oval Office for this meeting. How did it go? What did he say?
--:-- Robbie Whelan: I was told that he told the president, I went to China years ago and I became the most successful venture capitalist in China.
--:-- Jessica Mendoza: I was very, very successful there.
--:-- Robbie Whelan: The other thing that's important to know is that he didn't go in and say, look, I'm head of a multinational company. We need to be treated as such and given the leeway to operate in whatever country we want.
--:-- Jessica Mendoza: And basically said, I think that Intel is a great American company. I'm very dedicated to it.
--:-- Robbie Whelan: And I'm also very dedicated to your approach to manufacturing, to reshoring jobs in the manufacturing sector to making American factories great again.
--:-- Jessica Mendoza: He really signed on. He gave his endorsement to the president's manufacturing agenda.
--:-- Robbie Whelan: He spoke Trump language. He gave his endorsement to the president's plan.
--:-- Jessica Mendoza: And this meeting went fantastically well.
--:-- Robbie Whelan: At the end of it, Trump said, look, I'm not going to give you any more grief about stepping down. I'll back off.
--:-- Jessica Mendoza: Along with Trump and Tan, other members of Trump's cabinet were there, including Commerce Secretary Howard Letnick.
--:-- Robbie Whelan: And so going into that meeting, it sounds like Tan was going in there trying to make sure that he kept his job and that Intel was in the good graces of the Trump administration.
--:-- Jessica Mendoza: What about the Trump administration? What did they think they would get out of that meeting?
--:-- Robbie Whelan: Well, that's a really good question. So Secretary Letnick has been on this sort of interesting project recently, which is that—
--:-- Jessica Mendoza: The Trump administration views the CHIPS Act, this deal that gave billions of dollars to Intel, as a Biden project.
--:-- Robbie Whelan: And they're not fond of the idea of continuing to just sort of ride this train that the Biden administration set up for the tech sector.
--:-- Jessica Mendoza: The Chips Act allocated billions of dollars to multiple chip companies, not just Intel. TSMC and Samsung got billions too.
--:-- Robbie Whelan: Among other things, that money was supposed to encourage the companies to make chips in the U.S.
--:-- Jessica Mendoza: But the Trump administration wanted more than just domestic manufacturing investments from these companies.
--:-- Robbie Whelan: That's after the break.
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--:-- Jessica Mendoza: Welcome back to The Journal. Why shop at Burlington? Maybe it's the deals that are new each time you drop by. Maybe it's the brand names you'll be shocked Burlington has in store. Or maybe it's the quality of the items, the amazing selection, and the newest trends.
--:-- Robbie Whelan: If you like to save but also like to stay in style, Burlington is your answer. And the question you'll be asking yourself is, why go anywhere else? Burlington. Deals. Brands. Wow.
--:-- Jessica Mendoza: Tuesday on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show.
--:-- Robbie Whelan: I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands.
--:-- Jessica Mendoza: This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars.
--:-- Robbie Whelan: I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC.
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--:-- Jessica Mendoza: Welcome back to The Journal. The person in charge of figuring out how to get better deals from chip companies was Howard Letnick. Secretary Letnick has been going around and making the rounds with these companies that got these grants and saying, look, would you mind committing to bigger investments in the U.S.?
--:-- Robbie Whelan: We know that you are committed to bringing more jobs here, but we'd like to see more from you.
--:-- Jessica Mendoza: So he's been going around trying to put his own personal stamp on the CHIPS Act, sort of redo some of these deals, retrade some of these deals that they struck with the previous administration.
--:-- Robbie Whelan: But his team had a hard time figuring out what the U.S. could get from Intel because the company has been in a downward spiral.
--:-- Jessica Mendoza: And so he looked at Intel, or his team looked at Intel, and said, I wonder if we could get the same kind of increased commitment out of Intel.
--:-- Robbie Whelan: And the answer they came to was no. Intel is in such bad shape, they probably can't even, even if we ask them for a smaller, you know, small increase in their commitment to manufacturing investment in the U.S., they probably wouldn't even be able to do it.
--:-- Jessica Mendoza: They're in that bad a shape.
--:-- Robbie Whelan: And so what he wanted from this meeting was to come to some sort of arrangement where he could do the equivalent of what he did with these other companies like TSMC and sort of make sure that he was comfortable that the CHIPS Act money was serving taxpayers well and that the money they were giving Intel, the government was going to see some kind of good return on it.
--:-- Jessica Mendoza: And the solution they came to was, look, we should be getting a share in this company.
--:-- Robbie Whelan: So when the company profits, eventually, we hope, we will share in that profit as well.
--:-- Jessica Mendoza: There shouldn't be just a free lunch.
--:-- Robbie Whelan: Here's Letnick in a video he posted to X announcing the deal with Tan.
--:-- Jessica Mendoza: And we agreed that it would be fair that the same money that you give a company, America should have shares for it because it's just fair.
--:-- Robbie Whelan: So when Trump first said Tan should resign, was it really about China? Or was Trump trying to get Intel to come to the table?
--:-- Jessica Mendoza: That's the right question to ask.
--:-- Robbie Whelan: From my reporting, what I've been told by actually both sides is that regardless of whether or not Donald Trump actually wanted Li Boutin to resign over his China ties, what he sent out in that message on Truth Social on Thursday morning was an opening bid for these discussions.
--:-- Jessica Mendoza: Making what essentially amounted to a threat against the CEO I like you to resign I think you need to step down. You're too conflicted.
--:-- Robbie Whelan: That was a really good way for him to arrive at the negotiating table with a distinct advantage over his partner.
--:-- Jessica Mendoza: As for the details of the deal, the U.S. will convert the nearly $9 billion in grants that had already promised Intel into that 10% stake in the company.
--:-- Robbie Whelan: This makes the U.S. government Intel's largest shareholder.
--:-- Jessica Mendoza: And how has the CEO of Intel talked about this deal?
--:-- Robbie Whelan: He's been fairly cagey about it, except to say that he is very excited to work with the government as a partner.
--:-- Jessica Mendoza: He is all in on the president's manufacturing agenda.
--:-- Robbie Whelan: This is a big, important, historical agreement that we can work together.
--:-- Jessica Mendoza: And then more important, I don't need the grant, but I really look forward to have the U.S. government be my shareholder and we can work together and make Intel great again.
--:-- Robbie Whelan: And what does it mean for the U.S. to have a stake in Intel?
--:-- Jessica Mendoza: Is, like, is Lutnik going to be going to board meetings?
--:-- Robbie Whelan: So the administration has said that the government will not have a seat on the board and will not be directly involved in governance decisions.
--:-- Jessica Mendoza: The president has sort of pledged at this point to kind of stay out of LeBoutin's way, to not sort of make demands.
--:-- Robbie Whelan: But you can sort of tell that behind the scenes, there's going to be a relationship where it's like, if the government feels like it needs to exert pressure on this company, things aren't going well, they're going to have an open line of communication with Intel's management to sort of make their voice heard.
--:-- Jessica Mendoza: And there's one other thing folded into the deal.
--:-- Robbie Whelan: What they did was they put this provision in the deal that I'm told is viewed by both Intel and the White House as what's called a poison pill.
--:-- Jessica Mendoza: A poison pill, one that would incentivize Intel to keep its domestic chip-making business.
--:-- Robbie Whelan: Because the provision says that if Intel loses at least 51% of its manufacturing business, the U.S. government will receive an additional 5% of the company at a discounted share price.
--:-- Jessica Mendoza: That scenario would further dilute the value for investors and complicate the company's finances.
--:-- Robbie Whelan: But there are benefits for Intel, too. The U.S. government could send more customers its way.
--:-- Jessica Mendoza: So there's a sense, a real sense, that the next step is the Trump administration is going to maybe urge or lean on some of the other big tech companies out there to use Intel as their manufacturer.
--:-- Robbie Whelan: And our reporting shows that that is part of the plan going forward.
--:-- Jessica Mendoza: The Trump administration is going to do its best to help Intel find some customers for this manufacturing capacity that the government's asking them to build out.
--:-- Robbie Whelan: Could the U.S. try to make deals like this with other companies that received money from the CHIPS Act?
--:-- Jessica Mendoza: Yes.
--:-- Robbie Whelan: First of all, President Trump has said that he would like to make more deals like this.
--:-- Jessica Mendoza: But there was a brief panic when news started to leak of the Intel stake.
--:-- Robbie Whelan: A lot of the other companies in the same industry, for example, TSMC, kind of started to get worried.
--:-- Jessica Mendoza: And we started hearing about this, like, who's next? Are they going to take us over next? Are they going to take shares in our company? Are they going to make us enter some deal that is dilutive to our shareholders?
--:-- Robbie Whelan: And there was a serious concern about that.
--:-- Jessica Mendoza: So much so that Secretary Letnick came out a few days ago and said, look, anybody who has sort of worked with us, come to the table and complied with what we're trying to do on the CHIPS Act specifically. They should not worry.
--:-- Robbie Whelan: What does this moment tell us about how the Trump administration views the relationship between government and business?
--:-- Jessica Mendoza: Yeah, I think that CEOs of companies, especially in the tech sector, if they hadn't gotten the message by now that this is an administration that wants very badly to be involved, to have a say.
--:-- Robbie Whelan: And in some cases, this is the extreme case, right, even own a big stake of their companies, now they know.
--:-- Jessica Mendoza: Now they know that that's the strategy, or at least one of the strategies, that the Trump administration is willing to employ to kind of make sure that their agenda succeeds.
--:-- Jessica Mendoza: That's all for today, Wednesday, August 27th. The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Robbie Whelan: Additional reporting in this episode from Josh Dossie, Nicholas G. Miller, Amrith Ramkumar, and Lauren Thomas.
--:-- Jessica Mendoza: Thanks for listening. See you tomorrow.
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