Charles R. Goulding and Leah Nabangi explore how unprecedented U.S. government equity deals—from semiconductors to rare earths—are reshaping industry partnerships and creating ripple effects across the 3D printing sector.
The Federal government is participating in private company equity investments and economic transactions at an unprecedented level.
Nvidia and AMD
Nvidia and Advanced Micro Devices (AMD) have quickly agreed to a 15 % revenue share deal with the U.S. government for specific AI chips approved for sale to China. Although similar to a 15 % royalty, this would be an exceptionally high royalty in the regular commercial market. Presumably, Nvidia and AMD foresee a substantial business opportunity with this agreement. 15% of revenue is a large toll to secure business.
Nippon Steel Golden Share
As part of the Nippon Steel acquisition of U.S. Steel, Nippon has provided the U.S. government with a “Golden” share. A Golden share provides a government with ownership and control rights in a private enterprise. Other governments have had golden share investments, including Germany with Volkswagen and the U.K. with Heathrow Airport.
It is worth noting that as part of the acquisition approval process, Nippon has agreed to make US$14 billion in long needed new investments in U.S. Steel.
US$550 billion in Japanese Investment
With the new U.S. Japan trade treaty, the agreement provides for US$550 billion in new investments, with a major portion of the profit sharing related to those new investments going to the U.S. government. At this juncture, the details of this arrangement have not been fleshed out. With these types of transactions, the devil is in the details. A large profit share possibility is attractive, but only a reality if the transaction terms and accounting treatment results in actual profits.
Intel Investments
Intel and the U.S. government have reached a deal for the U.S. government to take a 10% ownership in Intel, the leading U.S. owned semiconductor manufacturer. The agreement converts previously approved federal grants into an US$8.9 billion equity investment, giving the government a passive stake in Intel instead of direct subsidies. The deal supports Intel’s domestic manufacturing expansion and semiconductor production. Non-U.S. owned semiconductor manufacturers making large investments in U.S. include Samsung and Taiwan Semiconductor.
US$400 Million Direct Investment in MP Rare Earth Minerals
This transaction where the U.S. Department of Defense has made a direct US$400 million investment in MP, the owner of the large California Mineral Pass rare earth mine and a Texas magnet manufacturing plant may be the most intriguing. The Department of Defense is concerned about China’s near monopoly on rare earth minerals. The details of this transaction have been disclosed and also include supply contracts. Recently, MP ceased selling rare earths to China. This agreement is considered a precursor for additional government investment in rare earth metal transactions.
US$10 Million Investment in Vulcan Elements
Although not a direct government investment, Vulcan Elements, a Durham, North Carolina-based producer of rare-earth magnets, has landed over US$10 million worth of contracts across every U.S military branch, securing nine Department of Defense contracts over the past 8 months. These agreements support the U.S. goal of developing a domestic supply of rare-earth magnets, reducing reliance on foreign sources for critical materials.
The Vulcan Investment and the MP investment described above demonstrate the U.S government’s strategy to secure rare earth minerals supply.
Previous U.S. Government Direct Investments
This is not the first time the U.S. government has made direct commercial investments. During the financial crisis the government invested US$80 billion in General Motors and Chrysler.
3D Printing Industry Impact
The new large U.S. commercial participation will impact the 3D printing industry. New legal structures with semiconductors will impact embedded electronics which is considered a high 3D printing growth opportunity. The Nippon U.S. Steel acquisition has restructured the entire U.S. metals industry landscape, an area where 3D printing is growing rapidly particularly with military applications.
The Research and Development Tax Credit
The now permanent Research and Development (R&D) Tax Credit is available for companies developing new or improved products, processes, and/or software. 3D printing can help boost a company’s R&D Tax Credits. Wages for technical employees creating, testing, and revising 3D-printed prototypes can be included as a percentage of the eligible time spent for the R&D Tax Credit. Similarly, when used as a method of improving a process, time spent integrating 3D printing hardware and software counts as an eligible activity. Lastly, when used for modeling and preproduction, the costs of filaments consumed during the development process may also be recovered.
Whether it is used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit-eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.
Conclusion
The U.S. government is entering into an unprecedented number of transactions that can be characterized as government/ industry private partnerships. Although these transactions may surprise traditional capitalists, we are in a new world of competition among nation states. There are opportunities to be had here and the 3D printing industry should carefully monitor these developments.
