After months of intense campaigning, Donald Trump is set to take over as the 47th President of the United States. At the heart of his agenda is a commitment to revive the struggling US economy, curb immigration, re-establish American energy dominance, prevent the risk of global conflict, and transform the nation into a manufacturing powerhouse by curbing outsourcing. Central to this vision will also be the semiconductor industry—a strategic sector that has dominated US policy discussions and debates.

Trump had signalled a strong commitment to securing America's technological independence by reshoring semiconductor manufacturing and reducing reliance on foreign supply chains. This could impact global dynamics, intensifying the tech rivalry with China and realigning incentives for domestic production, with implications across the semiconductor industry globally.

Looming challenges for the CHIPS Act

At the core of the US semiconductor policy today is the CHIPS and Science Act, signed by President Joe Biden in August 2022, which allocated $52 billion to bolster domestic chip manufacturing against Chinese dominance. The act was designed to not only support the US semiconductor companies in expanding their manufacturing within the country but also to encourage international giants to set up semiconductor manufacturing plants (fabs) in the US. This initiative aimed to strengthen national security, reduce reliance on overseas production, and safeguard the US semiconductor supply from geopolitical disruptions.

Of the $52.7 billion, the act included $39 billion in manufacturing incentives, including $2 billion for the legacy chips used in automobiles and defence systems, $13.2 billion in R&D and workforce development, and $500 million to provide for international information communications technology security and semiconductor supply chain activities. US-chip companies namely Intel, Micron, and Global Foundries, and global players including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Semiconductors, have been the direct beneficiaries of the law.

However, former President Donald Trump has been critical of the CHIPS and Science Act. During an interview on The Joe Rogan Experience, Trump expressed “We put up billions of dollars for rich companies to come in and borrow the money and build chip companies here, and they’re not going to give us the good companies anyway.” His recent remarks have raised concerns about the future and the implementation of this act.

The US CHIPS & Science Act was a bipartisan effort, a situation in which opposing political parties found common ground through compromise, and it cannot be scrapped.

Danish Faruqui, CEO of Fab Economics - a US-based boutique semiconductor Fab/OSAT Greenfield Projects advisory and implementation practice firm says, “The US CHIPS Act was passed through bipartition support and it cannot be rolled back. However, allocation within the CHIPS Act is something up for discussion. Also, all of the allocations that have been done so far, be it Intel, TSMC, Samsung or Micron, all of them have been allocated via PMT - a preliminary Memorandum of terms. It's non-binding, so it does not bind either side to do the investment, at the sector and green field level.” Faruqui explains, for instance, from the Intel side, or from the Department of Commerce CHIPS Act program office to provide the subsidies. This non-binding commitment would allow for any reallocation or rollback or recursion going forward.

While the overall program of the CHIPS Act should remain in place, no matter which party comes into office, Counterpoint Research’s Senior Analyst Yang Wang based in London says, “it is indeed true that the intention to boost domestic manufacturing of key tech components by offering large subsidies runs contrary to Trump's thinking about how to manage the US economy. Trump's overall economic agenda comes down to cutting costs (taxes) domestically while increasing costs (tariffs) for foreign players. It is certainly possible that a Trump administration would finetune the details within the Chips Act, for example favouring US companies or requiring recipients to meet more strict criteria on sourcing domestic labour, technology, material, and component input. Nevertheless, the US Chips Act should come secondary to Trump's line of attack should he come into office, as his administration would target the Inflation Reduction Act first due to its association with renewable energy and the EV sector.”

Trump's remarks raise concerns for the foreign semiconductor companies that have pledged to invest in plants in the US and secured Chips Act funding invariably if he comes to power. Given chip fabrication plant construction and the production ramp-up processes take years, these companies would have operational and legal guardrails in place to deal with changes that come inevitably with a change of government.

Amidst all these developments, a US-based semiconductor veteran and consultant with over 3 decades of experience - Jeffery Cooper expresses, “The Chips Act is vital for US semiconductor independence, and stable policy will be crucial for sustaining industry confidence and global partnerships, regardless of leadership changes."

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