US President Donald Trump has announced his intention to abolish the CHIPS and Science Act, which allocates $52.7 billion in subsidies to the semiconductor industry.
Trump has argued that the act is ineffective and has proposed using the remaining funds to reduce the national debt. This move could have far-reaching consequences for the US technology sector and economic policy.
Trump’s Criticism of the CHIPS Act
During a recent address to Congress, Trump strongly criticised the CHIPS Act, calling it a “horrible, horrible thing.” He argued that the funding allocated under the act has not been effectively utilised.
“We give hundreds of billions of dollars and it doesn’t mean a thing. They take our money, and they don’t spend it,” Trump stated. “You should get rid of the CHIPS Act, and whatever is left over, Mr. Speaker, you should use it to reduce debt.”
Trump’s comments signal a shift in US policy regarding semiconductor manufacturing and could have a significant impact on the industry, which has relied on federal subsidies to bolster domestic production.
Background: What Is the CHIPS Act?
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act was signed into law by former President Joe Biden in August 2022. The legislation aimed to strengthen the domestic semiconductor industry by reducing reliance on foreign manufacturers, particularly those in Taiwan and China.
The CHIPS Act allocated $39 billion in subsidies for semiconductor manufacturing within the US and provided an additional $75 billion in government loan authority. The law was introduced in response to concerns about national security and economic stability, given that the US domestic semiconductor production had fallen from 40% in 1990 to just 12% by 2022. In contrast, Taiwan accounted for 60% of global semiconductor production, including more than 90% of the most advanced chips, according to the Council on Foreign Relations.
Recent Grants and Investments
In the final weeks of the Biden administration, the US Department of Commerce approved over $33 billion in grants to semiconductor companies. This included $4.75 billion to South Korea’s Samsung Electronics, $7.86 billion to Intel, $6.6 billion to Taiwan Semiconductor Manufacturing Company (TSMC), and $6.1 billion to Micron. These grants were part of efforts to attract leading-edge semiconductor firms to set up manufacturing facilities in the US.
Former Commerce Secretary Gina Raimondo had played a key role in securing agreements with the world’s top semiconductor firms to establish production sites in the United States, citing national security concerns over reliance on imported chips.
However, following Trump’s recent statements, concerns have been raised over the future of these grants. Some officials have questioned whether previously approved subsidies will be upheld under his administration.
Impact on Industry and Political Reactions
New York Governor Kathy Hochul has strongly opposed Trump’s proposal, arguing that the CHIPS Act has been a major driver of investment and job creation.
“This law is the reason Micron is bringing $100 billion and 50,000 jobs to Central New York. Trump just said he wants to get rid of it,” Hochul told Reuters.
Meanwhile, TSMC has announced plans to invest $100 billion in the US, including the construction of five additional semiconductor plants. However, despite being eligible for a 25% manufacturing investment tax credit, TSMC has not received any direct subsidies from the government.
Administrative Shake-up
Following his statements on the CHIPS Act, Trump dismissed nearly one-third of the staff in the US Commerce Department office responsible for overseeing $39 billion in manufacturing subsidies for semiconductor producers.
This move adds further uncertainty to the future of the CHIPS Act and raises questions about the fate of the grants and investments already in motion.
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South Korea Allocates $13 Billion to Boost Semiconductor Industry Amid Global Competition
