In the United States, an intriguing economic experiment is currently taking place. The Trump administration has decided that public funds will no longer be distributed as free aid packages to semiconductor companies but will instead be converted into shares in the companies themselves. Intel is the first to enter negotiations for such an arrangement, with Micron and TSMC expected to follow.
Behind this move lies a simple yet radical idea: If taxpayers finance the establishment of strategic factories worth billions of dollars, the public is entitled to a share of the future value, rather than settling merely for promises of jobs and taxes.
In doing so, the US government effectively positions itself as a player in the capital market – a kind of national investment fund seeking to benefit from the rise in value of technology companies, while also bearing the risk of failure.
Opportunities and drawbacks
This initiative has sparked intense debate, as governments are not generally seen as experts in speculative investments, and there is concern that the public could end up sharing in losses in the event of business failure.
On the other hand, supporters argue that this move precisely returns capital to the public instead of leaving profits solely in the hands of private shareholders. In Israel, the model is entirely different.
The Innovation Authority provides millions to start-ups in exchange for relatively minor royalties, but does not demand equity. Even giants like Intel receive unprecedented grants worth billions and reduced tax benefits, without the State of Israel directly enjoying a share in the company’s success.
The local perception is that the return comes in the form of thousands of jobs, billions in procurement from local suppliers, and the deepening of technological knowledge within the economy. This model positions the state as a supporter and catalyst but not as a shareholder.
Can this be applied in Israel?
Now the question arises whether Israel should also adopt a different approach. On one hand, it is difficult to ignore the fact that large amounts of public money are funneled into giant corporations and promising start-ups, and it may be reasonable to demand a genuine stake in companies that grow based on such support.
This could create a mechanism in which market successes finance the next wave of innovation, or alternatively, are directed toward strengthening hi-tech in the periphery through training, grants, and placements – so that the public benefits not only from profits but also from expanded circles of opportunity.
On the other hand, the risks are considerable. Requiring equity could deter multinational corporations from strengthening their operations in Israel and cause young entrepreneurs to fear state interference in future profits. Moreover, a state that becomes a shareholder would have to manage a complex investment portfolio, with all that entails – transparency, conflicts of interest, and questions regarding involvement in business decision-making.
Israel actually has positive past experience with such a model: the “Yozma” program in the 1990s, in which the state invested in venture capital funds, held shares, and fostered an entire industry that was later successfully privatized. Perhaps the time has come to revisit this option, especially in an era when private technology companies enjoy massive sums from the state budget.
This discussion is not merely technical but also ethical: Is the government’s role solely to stimulate growth and employment, or also to ensure that the public becomes a full partner in the profits of hi-tech success? There may be no definitive answer, but it is a necessary debate, because ultimately it is our money at stake.
The writer is the CEO and founder of Good Quality, a company specializing in software testing and automation development, based in Ofakim, with operations in the United States and South America.