🆕 Intel’s $20B comeback

The Hustle

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Today’s rundown:

  • Intel: The chip giant is making a $20B manufacturing bet.
  • PayPal to buy Pinterest?: Does a $45B acquisition make sense?
  • Digits: Dino millionaires, 305m Champagne bottles, and more oddball numbers.
  • Around the web: Arachnologists, a site for finding words at the tip of your tongue, and other wild internet things.

Let’s do it.

The Big Idea
Intel chip

Intel’s $20B pivot could save the company, and help solve the chip shortage

At a basic level, there are a few ways to make money in the world of microchips:

  • Producer: Design microchips yourself and sell them to customers
  • Foundry: Manufacture chips according to customers’ designs

Intel built an empire doing the former, continuously outpacing rivals with leading-edge designs.

Then, a combination of factors knocked it off this path:

  1. Apple, one of Intel’s biggest customers, began designing its own chips, and enlisted TSMC (Taiwan Semiconductor Manufacturing Company) to manufacture them
  2. Intel experienced delays in its top chip launches in 2015 and 2017
  3. Other companies followed Apple’s lead and began designing their own chips

Fast forward to today, and 90%+ of state-of-the-art chips are made by TSMC, with the rest made by Samsung.

Intel wants to be a foundry, too…

… and they’re willing to pony up the cash to do so. The firm just dropped $20B on 2 new fabs (fabrication plants).

The foundry strategy isn’t without challenges. Manufacturing chips has traditionally had low margins and requires massive scale to be successful.

But once a firm reaches that scale (like TSMC), it creates a virtuous cycle:

  • More sales opportunities help perfect the manufacturing process
  • More customers lead to faster innovation

It will take time to tell if it’s working

Intel’s fabs will take ~2 years to build, and experts believe it will take 3-5 years to gauge whether the strategy will work.

Notably, TSMC is an outlier, and its margins are boosted by government subsidies that are much higher than the US’s. Experts are still optimistic: The US needs computer chips, and global supply chain issues are proving it pays to have them domestically.

If Intel can be the one to supply them, it may just return to its glory days.

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SNIPPETS

Tax break: Google lowered its app store fee to 15% for subscription-based apps, and as low as 10% for music streaming apps. #ecommerce-retail

Beamer with a plug: BMW announced it has started production on its i4 electric car. #clean-energy

CryptoMart: Walmart launched a test in 200 stores to allow customers to buy bitcoin at kiosks. #emerging-tech

Hacking hackers: REvil, a ransomware gang, was hacked by a multi-country government operation, including the US. #privacy

Brex — the corporate credit card startup — is in talks to raise $300m at a wild $12.3B valuation. #fintech-cryptocurrency

Um… that’s a new one: Sam Altman launched Worldcoin, a startup that scans people’s eyes in exchange for free cryptocurrency. #fintech-cryptocurrency

Befuddling bias: Twitter’s internal research shows that it amplifies right-leaning political content, but they don’t know why. #big-tech

Huge Deal
Pinterest screenshot

If Leonardo da Vinci had Pinterest (Souce: YouTube / Pinterest)

PayPal is eyeing a $45B acquisition of Pinterest — does it make sense?

Most of us know Pinterest as the social media platform built around digital pinboards and images.

Soon, we may know it as part of one of the largest social M&A deals ever. PayPal — the $290B payments firm — is in talks to acquire Pinterest for $45B.

Does the deal make sense?

Pinterest has a large audience (454m users) that is primarily female and creates content for commerce-friendly verticals like fashion and home decor, according to Bloomberg.

Right now, the platform makes most of its money with ads, but it’s very under-monetized. By comparison, Facebook has 47x the revenue of Pinterest with only 6x as many users.

With resources and backing from PayPal, Pinterest could build on-platform ecommerce tools (think of how users make purchases within Instagram). PayPal would get a 2.9% payment fee on any transaction.

Another deal ‘synergy’ (can’t believe we used this word)

PayPal can encourage its 32m merchants to advertise on Pinterest. Why would Pinterest do the deal? Per The Motley Fool, the social platform has:

  • Slowing revenue growth
  • A shrinking domestic user base
  • HR issues including its co-founder and chief creative officer recently leaving the firm

As long as no one touches this “dad jokes” pinboard, the deal sounds reasonable enough to us.

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By The Numbers
dinosaur

Digits: Dino millionaires, 305m bottles of Champagne, and Chinese films.

1) “Battle of Lake Changjin,” a Chinese movie about soldiers fighting US forces during the Korean War, is on track to be 2021’s 2nd-highest-grossing film, with a total box office of $843m. Unsurprisingly, it’s made $0 outside of China.

2) There’s a new rodeo in town, as Formula 1 racing went to Austin this week. The sport’s American fan base has grown 40% to ~50m people since 2018.

3) When Facebook crashed the other week, Netflix engagement spiked 14%. We now know that humans can rapidly adapt to other forms of procrastination in times of crisis.

4) It’s poppin’. Following a dry 2020 during which the global Champagne industry sold 244m bottles — an 18% drop —  they now expect to sell 305m bottles in 2021.

5) A 66m-year-old South Dakotan native, Big John — the largest triceratops fossil ever found — sold last week at a Paris auction for $7.74m. His cousin, Stan the T. rex, sold for $31.8m last year.

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AROUND THE WEB

🎃 On this day: In 1978, John Carpenter’s “Halloween” debuted in Kansas City, Missouri. With a budget of ~$325k, it would ultimately gross $47m+ at the box office and spawn 11 additional films.

Cure boredom: Bryan Braun started making digital art using check boxes. Then he started making interactive check box art, which you can play with here.

🤝 How to: Congratulations, you’re hired! Except you don’t want the job. Here’s how to turn down an offer without burning a bridge.

🕸 That’s interesting: An arachnologist (AKA spider expert) explains everything you ever wanted — or maybe never wanted — to know about cleaning spiderwebs from your home.

🤔 Useful: This website helps you identify a word when it’s right on the tip of your tongue.

🧴 Art: Artist Jess Irish’s “This Mortal Plastik” is a short documentary that weaves together illustrations, stories, and poems as it ponders the impact of plastic on our environment.

Meme of the day
Pinterest meme

(Source: Digital Mom Blog)

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