William Lazonick and Matt Hopkins, writing at Institute for New Economic Thinking have been looking at the numbers to work out why Intel fell behind TSMC and SEC in semiconductor fabrication.
Their theory is that Intel is engaged in two types of competition, one with companies like TSMC and SEC in cutting-edge fabrication technology and the other within Intel itself between innovation and financialisation.
The Asian companies have governance structures that vaccinate them from an economic virus known as "maximising shareholder value" (MSV). Intel caught the virus over two decades ago. As we shall see, with the sudden appointment of Gelsinger as CEO this past winter, Intel sent out a weak signal that it recognizes that it is sicker than a dog and needs to quarantine.
In the years 2011-2015, Intel was in the running, along with TSMC and SEC, to be the fabricator of the iPhone, iPad, and iPod chips that Apple designed.
While Intel spent $50 billion on P&E and $53b. on R&D over those five years, it also handed over more than $36 billion to shareholders in stock buybacks and $22 billion in cash dividends, which together absorbed 102 per cent of Intel's net income.
From 2016 through 2020, Intel spent $67 billion. on P&E and $66 billion on R&D, but distributed almost $27 billion as dividends and another $45 billion as buybacks.
Intel's ample dividends have provided an income yield to shareholders for, as the name says, holding Intel shares. In contrast, the funds spent on buybacks have rewarded share sellers, including senior Intel executives with their stock-based pay, for executing well-timed sales of their Intel shares to realise gains from buyback-manipulated stock prices.
If Intel had not been so busy trying to impress Wall Street and its shareholders it might have lavished more money on R&D and equipment and not have a TSMC problem, Lazonick and Hopkins say.