President Donald Trump‘s administration is becoming increasingly aggressive in attempting to rebuild the nation’s national security industrial base. In July, the Department of Defense took a $400 million financial position in MP Materials, a small American rare earths company. 

Now, in a possibly even more transformative transaction, the Trump administration is holding internal discussions about taking a 10% equity stake in Intel Corp. If the administration were to move forward, the federal government would become one of Intel’s largest shareholders. The administration is debating whether to convert into a 10% equity stake, the monies given to Intel as part of the Chips and Science Act.  A deal remains up in the air. 

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The administration wants to ensure that the United States has state-of-the-art semiconductor fabrication technology located in this country. At the moment, over 90% of the most advanced semiconductors are fabricated in Taiwan by Taiwan Semiconductor Manufacturing Company, the global leader in chip fabrication technology. Taiwan’s proximity to China and the possibility that China might attempt to invade and take over Taiwan puts the U.S. in a strategically vulnerable position. If China controlled Taiwan and Taiwan Semiconductor, the U.S. would be a hostage to China with regard to chips, which are a foundational technology for this century. 

Under the prodding of the Trump administration, Taiwan Semiconductor and other chip fabrication companies are building chip manufacturing capacity in the U.S. But when these fabrication facilities are completed, the U.S. will remain heavily dependent on Taiwan for the most advanced chips. At most, the U.S. share of global semiconductor fabrication capacity would reach 20% in five years. 

So, from the standpoint of national security, building domestic chip manufacturing capacity is sound policy. But is taking an equity stake in Intel the preferred path to expanding domestic chip production? 

Intel has two major businesses: a products business, where it sells chips to customers, and a foundry, a chip fabrication operation. The products business is mature but profitable. Unfortunately, this business is rapidly losing market share to AMD, a U.S. semiconductor company, and Arm Holdings of the United Kingdom. 

To compound Intel’s challenges, its foundry business is hemorrhaging money. The foundry business lost $18 billion in 2024. And in the first half of 2025, Intel’s chip fabrication business lost over $3 billion. Such losses aren’t financially sustainable. Intel is also slashing its workforce. It cut 15,000 jobs last year and plans to reduce employment by even more this year. Clearly, Intel is a company under siege. 

Softbank’s recently announced $2 billion equity injection into Intel is not going to right the ship. The company is reviewing its long-term strategy. Its new CEO, Lip-Bu Tan, has halted plans to build five advanced semiconductor fabrication facilities. The company’s balance sheet cannot sustain that level of capital investment.

When Intel announced its June quarter results, Lip-Bu Tan said that the company is pulling back from its fabrication strategy. The company will downsize its 18A, 1.8 nanometer, fabrication business and focus solely on its state-of-the-art 14A, 1.4 nanometer, fabrication technology. 

Intel’s 14A technology is at the leading edge of processor fabrication. Apparently, it will deliver a 15% to 20% performance improvement with a 25% to 35% reduction in power consumption over the predecessor 18A.  But it remains inferior to Taiwan Semiconductor’s most advanced manufacturing system. Nvidia, AMD, and the other world leaders in semiconductor design technology have failed to commit to using Intel’s 14A. Seemingly, they want to stay with Taiwan Semiconductor. 

The Intel CEO has said that the company will only move forward with the 14A technology if it secures orders from Nvidia and the other leading chip companies. 

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Does the Trump Administration want to deepen its involvement with Intel, a company that is clearly facing severe competitive challenges? A better strategy would be to encourage Taiwan Semiconductor to invest even more in the U.S. Trump may want a U.S.-domiciled semiconductor champion, but investing in a rapidly deteriorating business would not be a good strategy. 

As an alternative, the administration could direct the DOD to use Intel’s 14A technology. This is the second-best solution, but it provides a path to increasing the supply in the U.S. of the most advanced chip fabrication technology. National security, not national ego, should be the goal. 

James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X and reached at [email protected].