Trump’s Threat to the CHIPS Act: A Looming Crisis for Semiconductor Funding

In a surprising turn of events, President Donald Trump has publicly called for Congress to abolish the CHIPS Act, a critical piece of legislation aimed at boosting semiconductor production and research in the United States. This act, which was signed into law in 2022, was designed to reduce the nation’s reliance on foreign-made chips and to enhance domestic manufacturing capabilities.

The CHIPS Act: A Lifeline for Semiconductor Manufacturing

The bipartisan CHIPS Act allocated a staggering $52.7 billion to fund the construction of semiconductor manufacturing and research facilities across the country. Currently, the United States accounts for a mere 10% of the global chip production, with the majority of chips used in essential devices—ranging from smartphones to military equipment—being manufactured overseas. This imbalance became glaringly evident during the COVID-19 pandemic, when shutdowns in foreign chip plants led to significant shortages, hampering the availability of various products.

Trump’s Criticism of the CHIPS Act

During his address before a joint session of Congress, Trump labeled the CHIPS Act a “horrible, horrible thing,” asserting that companies benefiting from the funding have not adequately utilized the financial support. His remarks raise concerns about the future of semiconductor production in the U.S. and the potential consequences of dismantling this crucial legislation.

Impact on Major Companies

Intel, the largest chip manufacturer in the U.S., has been a significant beneficiary of the CHIPS Act, receiving a $7.9 billion grant to facilitate the establishment of new manufacturing plants across the nation. Other major players, including Samsung, SK Hynix, GlobalFoundries, and Texas Instruments, have also received funding through this act. The implications of Trump’s threats could jeopardize these companies’ plans and hinder the overall growth of the semiconductor industry in the U.S.

TSMC’s Investment in Arizona

Trump highlighted TSMC’s recent announcement to invest $165 billion in its Arizona chip manufacturing facility, claiming that the company is proceeding without U.S. financial support. However, TSMC has clarified that this investment will be bolstered by funding from the CHIPS Act, which is essential for supporting its previously announced $65 billion construction plans in Arizona. The additional $100 billion investment underscores the importance of the CHIPS Act in facilitating domestic semiconductor production.

The Future of the CHIPS Act

While Trump has previously considered the possibility of terminating the CHIPS Act and imposing tariffs on overseas semiconductor production, such actions could have dire consequences for Intel and other companies striving to expand their manufacturing capabilities. Reports suggest that the Trump administration has even proposed restructuring Intel’s struggling foundry segment, potentially placing it under the management of TSMC or a consortium of companies.

Risks of Rescinding the CHIPS Act

Eliminating the CHIPS Act would not only delay the construction of vital chip plants across the U.S. but also threaten the nation’s ability to maintain a robust supply of semiconductors. As of now, there is no official plan to abolish the CHIPS Act, but the ongoing discussions within the Department of Government Efficiency (DOGE) regarding budget cuts raise alarms about the future of semiconductor funding.

In conclusion, Trump’s threats to dismantle the CHIPS Act could have far-reaching implications for the semiconductor industry and the U.S. economy as a whole. As the nation grapples with the challenges of global supply chain dependencies, the fate of the CHIPS Act remains a critical issue that demands attention. For more details, you can read the original article here.