Last month, President Trump announced that the federal government had obtained a 10% stake in Intel, Oregon’s largest private employer. Nvidia, one of Intel’s biggest competitors, announced last week that it would invest $5 billion in Intel. The company also got a $2 billion investment from SoftBank. Mike Wilkerson, director of Economic Research at ECOnorthwest, joins us to talk about what all this means for Intel and for Oregon.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Last month, President Trump announced that the federal government had obtained a 10% stake in Intel, one of Oregon’s largest and most important private employers. Then last week, Nvidia, one of Intel’s biggest competitors, announced that it would invest $5 billion into the company. All of this is on top of a recent $2 billion investment from SoftBank, and it comes at a crucial time for the company. Intel has laid off thousands of Oregonians in the last two years as it’s fallen behind on advanced chip manufacturing.
Mike Wilkerson is the director of economic research at ECOnorthwest. He joins us to talk about what this huge infusion of cash means for the company and for Oregon. Mike, welcome to the show.
Mike Wilkerson: Thanks for having me.
Miller: Let’s start with the big picture, then we can dig into some of the details. What role does Intel play in Oregon’s overall economy?
Wilkerson: I think the nature of that can’t be understated. I would make the following statement. Intel is more important to the Oregon economy than any other company is to any other state. Or maybe put differently, no company is more important to the success of a state’s economy than Intel is in Oregon.
Miller: I’ve never heard it put in such stark terms. I guess I’ve always heard it’s the most important company in Oregon, but what you’ve just said is way more profound.
Wilkerson: Precisely. It’s hard to quantify. But to the extent that we can look into it, what we look at is, oftentimes, count of employees and Intel certainly is the largest count of employees in the state. But if you broaden the aperture and you look across the country, there are very few states that have manufacturing high value-add employers, as the largest in their state. That is very infrequent.
Then you look at GDP, let’s say a measure of productivity. If you start to look at sectors that have the highest contribution of GDP in their states, computers and electronics is the sub-sector that semiconductors live. Oregon is the only state in the country that has that as its most concentrated industry. And if you look at that, relative to other states, for example, you might see other states that have high concentrations in one industry, but those industries are going to be multiple employer diverse industries.
When you look at semiconductors in Oregon, depending on what measure you’re using – count of employees or GDP – Intel could be up to 80% of that industry. And so when you start to see Intel’s role in an industry that is so prominent to Oregon, other states that have industries that are vital to their success might have three, four, five companies in that space. When you start to look at it through that lens, I think you can credibly make the case that Intel’s success in Oregon is more important than any other company in any other state.
Miller: As you’re saying that, what really stands out to me is that you could look at this as both a mark, a measure of just how prominent Intel is, but it’s also, the negative way to say it: we are not a very diversified state in terms of this really powerful or lucrative sector. The sector, largely or primarily, is Intel. So the fate of this entire important sector rests with this one company.
Wilkerson: You can look at the transition of Oregon’s economy over the last many decades, from one that was primarily a timber economy and it transitioned into a high value-add productivity economy. And Intel, not single-handedly but certainly, was crucial in that transformation. Where now, when you look at Oregon’s role in the national economy, we are very different from almost any other state. Looking at the current state of trade and trade policy, there are only 11 states that export more than they import – Oregon is one of those. If you just look at the net dollars, Oregon exports something like $6 billion more than it imports. Only two other states contribute more. And they are natural resource extraction states in Texas and Louisiana.
So when you start to think about producing goods, Oregon is at the forefront of that. And when you look, semiconductors are $13 billion of those exports. So, absent semiconductors, Oregon is not an exceptional state from many others. It would also have a trade deficit. And so you should start to see that Oregon has a very unique, prominent role in the U.S. economy and you can start to trace all of that back to semiconductors. When you trace it back to semiconductors, we’re really talking about Intel.
Miller: Let’s talk about the challenges they have been facing that have led to the necessity of these major investments. Intel has cut about 5,400 jobs in Oregon in less than two years. What’s been going wrong with the company?
Wilkerson: It’s challenging. Any time you’re an industry leader, the risk is always that other companies can take on different amounts of risk and see some of that dominance. If you look back to Intel, probably some of those decisions stem from cell phones and stem from data center processing, and what has now emerged into AI. Because of the prominence of those two industries and market share, and Intel not prioritizing that, they’ve really lost that kind of industry leading advantage.
And the challenge with semiconductors is, it’s not like you can pivot and a year out say, “Oh, we made a bad decision.” When they’re looking at these massive billion dollar investments, there are many years, if not a decade out, in front of what they’re trying to do. So course correcting is very challenging to do and now that there’s full eyes wide open into that, it’s a very painful transition. And that painful transition has resulted in, as you’ve mentioned, decreases in employment. But I think the goal is trying to figure out how you balance the short-term revenue expectations and needs of a company versus that long-term R&D and cutting edge. It’s a really challenging industry to operate in.
Miller: OK, let’s get to some of the recent news, starting with the federal government’s involvement. How did the government end up with a 10% stake in Intel?
Wilkerson: We’re entering a new era of public-private partnership [that] balances around national security and vital industries. This is commonplace in other places around the world. So this hasn’t, to date, been common in the U.S. But I think if you look at, CHIPS Act and other public policies, this is, I don’t want to say a natural evolution, but it’s a change in course, with the same fundamental understanding that certain industries are really important to long-term success and national security of the country. And what are ways that the government can help bolster and support those industries? This is one of the ways the government came in and said, “We’re going to take a non-trivial stake in your company and hope that it contributes to the long-term success.”
Miller: As I understand it, the Trump administration turned Biden-era grants, which the company had already been promised, into this 10% ownership stake. Correct me if I’m wrong, but Intel did not get any new federal money that it hadn’t already been expecting, but instead, that money that was turned into this 10% equity stake. There are fewer strings attached to this money, if I understand this correctly. But did Intel have any choice here or were they basically forced into this?
Wilkerson: I don’t know if forced is the word, but I think there are strong incentives, let’s put it that way. More so than most or potentially any administrations in the past, you want an ally in that administration, not an adversary. So while they maybe weren’t forced, I think the incentives were very strong for them to pivot into this type of an agreement.
Miller: It’s worth pointing out that just a few days before the deal was announced, the president called for the CEO’s resignation. What might the Trump administration do with the control it now holds?
Wilkerson: I think that’s unclear. Putting a positive spin on that and trying to understand how, when you start to think about negotiating trade agreements around the world, you start to think about the role of semiconductors in that. Now, there’s a vested interest that’s tied to a specific investment that they have made. Certainly, that investment, from the federal standpoint, has already increased dramatically in value. So I think, from that standpoint, being able to communicate those wins as being mutually beneficial to the general public as well as to industry, to me, is the positive spin on that.
Miller: OK, so that’s the federal government side. Then last week came maybe equally big news for Intel. It’s that Nvidia was buying $5 billion of Intel stock, a smaller stake than the federal government, but a meaningful one. How would you describe the earlier relationship between Nvidia and Intel?
Wilkerson: Historically, you would think of them as largely competitors, although there was some sharing of patents and technology. And I think the scale of Nvidia is important, to put some context around. Earlier today, they announced a $100 billion investment in OpenAI. So, not to downplay the role of $5 billion, but for a company the size of Nvidia, the dollar amount was trivial. The hope is, though, that partnership then produces some meaningful benefits to both companies. And from an Oregon perspective, certainly, the benefit to Intel is what we’re more interested in than the $5 billion itself.
Miller: Let’s follow up on that then, because when you add in all of these different investments – the $2 billion from this Japanese investment bank, the federal money and Nvidia’s – Intel now has something like an extra $16 billion of cash on hand. But had their problem been in recent years that they did not have enough cash? Or is it, as you’ve been describing, more long-term systemic, strategic decisions that are sort of bearing not great fruit right now?
Wilkerson: I think it’s largely the latter, which is the long-term strategic decisions. What is hard to understand is, if they’re pivoting, does that pivot require an infusion of capital? And the answer to that might be yes. And I think through the context of Oregon, it’s important to understand what Intel’s function is and what they have historically done in Oregon. Understanding why partnering and aligning with Nvidia could be a sign of a pivot from one of contraction in the state to one of expansion. And it’s really about Intel when they’re doing cutting edge R&D, that happens in Oregon. And when they’re going to production of chips and perfecting processes, that also typically happens in Oregon. It’s when they’re really thinking about more production of the current technology, that’s happening all around the rest of the country.
So to me, the partnership with Nvidia, yes, is somewhat about getting revenue at scale today, partnering with AI to deploy in data centers and other places. I think it’s also equally about understanding how Intel’s patents and technology, partnered with Nvidia, could really lead to that next cutting edge. And I think that’s really where Oregon stands to benefit most.
Miller: So the company is still committed, it seems, to cutting edge research and development, as opposed to becoming a kind of contract maker of very good quality chips for companies all around the world?
Wilkerson: That’s a little bit unknown at this point. My sense is they’re hedging slightly in that space. I think the long-term prospects of the company rest on its ability to be relevant and generate revenue today. And if that is using the scale of its foundries and its fabs to produce chips today, that’s great. But ultimately, in the long run, the success of the company is going to be on developing that next cutting edge age.
When you’re in survival mode, yes, the very long-term matters. But they really also have to understand how they can change the revenue structure of the company today to be sustainable, to get to that long-term. Then potentially, those investments in R&D can get Intel back at the forefront of the technological revolution that we’re seeing underway, as it relates largely to AI.
Miller: And as you were saying, it’s those kinds of longer term investments and pushing the technology really forward. That’s what Oregon has been – that sort of workplace laboratory. So if they’re going to return to that, then Oregon could continue to benefit. And if the company has a major pivot, then even with these investments, Oregon may not see that money locally. Is that a fair way to put it?
Wilkerson: I think so. I mean, you can’t understate the amount to which they’re continuously investing in the R&D infrastructure that they have here in Oregon. And so, yes, the buildings are there. But what they’re continuously doing is retooling and bringing in cutting edge, giant lithograph machines. Oregon is the home of the most technologically advanced version of that, one of three places in the world that has this technology. And when you’re really thinking about developing that, it’s just continuous infusion into the state. That’s really the benefit to the state and why so many of their employees earn a wage much, much higher than anywhere else in the economy, because of that very niche product development and research that they’re doing here.
Miller: I want to take a broader look here. You made national, maybe international, news back in February when you made a presentation, saying that Portland was in danger of entering a so-called urban doom loop. Can you first just remind us what that is?
Wilkerson: Certainly. When you’re thinking about economies, there’s two things that can happen. It’s a series of decisions and outcomes that are positive and virtuous, and they build. Oregon had been certainly in that place for many decades. And then there’s a series of events in which demand is decreasing, for whatever reason. As that demand decreases, you start to see that flowing from the private sector into the public sector, and a declining state of resources and fiscal austerity starts to take hold. As the public sector lacks resources, their ability to deliver services declines. The concern is that then leads into the next phase of demand and decline, which then leads back into, and you get into a period of, many years or potentially decades of decline. And that’s the cautionary tale.
Miller: What was it like eight months ago when this presentation was picked up nationally?
Wilkerson: From an applied researcher standpoint, I think you always hope that the work that you’re doing is gonna lead to a heightening of conversations and the ability to have a sphere of influence in public policy. That certainly was the case at that moment in time. But if you look at the state of the economy today, I don’t know that we’re a lot better off than we were a year ago.
When we were looking at the trends, what was concerning was the decline in jobs and the decline in population, and that, coupled with the state of the central city in Portland. So when we look at those conditions a year ago, today we do see some areas of improvement. But largely, we see the same or potentially even an acceleration of those negative feedbacks that we were so worried about.
Miller: I appreciate the care you’re putting into the way you’re talking about this. But just to put it really simply, it seems like, if anything, you’re more worried today than you were a year ago about Portland’s economic future?
Wilkerson: Once you face several years of employment decline that is across every single sector, it’s very challenging to understand the root causes of that and therefore, the public policy interventions that can help support that. But certainly, population decline makes it very challenging to grow jobs. So if you’re starting to look at the state of the economy, Portland has historically been an attractor of people from the rest of the country. And that had been the case, where when the U.S. economy was growing, Portland’s economy always grew faster.
We now have eight quarters of where that isn’t the case and you start to think about what it is that would turn that around? What is the precipitous event that would change that? And that is what has us worried. We’re seeing, unfortunately, an acceleration of job loss in the Portland metro in the last 12 months. We have 25,000 fewer jobs than we did a year ago. And if you start to look at what that means, there are only five of the top 50 metros in the country that are losing jobs, and we’re second to worst. We’re 49th out of 50. So when the national economy is trending toward stagnation, for a variety of reasons that we’re probably not gonna get into in this interview, you would think Portland is going to only feel more of that pain, rather than necessarily seeing signs for optimism around how we would turn it around.
Miller: Mike Wilkerson, thanks very much.
Wilkerson: My pleasure.
Miller: Mike Wilkerson is the director of economic research at ECOnorthwest.
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