Will the CHIPS Act survive a Trump presidency?

President-elect Donald J. Trump has made no bones about it: legislation passed under the Biden Administration could be on the chopping block once he enters office on Jan. 20, including the bipartisan CHIPS and Science Act.

The CHIPS Act allocates billions of dollars in funding and tax incentives to semiconductor companies to help bring chip manufacturing back to the US.

On the Joe Rogan Experience podcast late last month, Trump said CHIPS Act is “so bad,” and said instead of helping fund new fabrication (fab) and R&D centers, the US should have put tariffs on overseas semiconductor makers. He compared the semiconductor industry to the auto industry as to how tariffs could work to bring back manufacturing.

Trump said, “paying a lot of money to have people build chips, that’s not the way. You tariff it so high that they will come and build their chip companies for nothing. 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. Taiwan, they stole our chip business. They want us to protect [them]. They don’t give us any money to protect them.”

Trump was in all likelihood referring to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest producer of computer chips. Computerworld reached out to Trump campaign officials after last week’s election, but did not receive a response.

TSMC is currently building two major semiconductor manufacturing facilities in Arizona — one a 5nm chip fab, the other a 3nm fab plant. The semiconductor designer and manufacturer is being promised $6.6 billion in CHIPS Act funding; in return, the company pledged to bring its most advanced 2nm process technology to US shores and added plans for a third fabrication plant to its Arizona site.

TSMC CEO CC Wei told investors last month he expects volume production of the company’s first Arizona fab to start in early 2025. “We are confident [it will] deliver the same level of manufacturing quality and reliability…as from our fabs in Taiwan,” Wei said. “Our second and third fabs will utilize more advanced technologies based on our customer’s needs. The second fab is scheduled to begin volume production in 2028 and our third fab will begin production by the end of the decade.”

Intel Corp.

Jack Gold, principal analyst with tech industry research firm J. Gold Associates, said Trump’s plan to enact tariffs on oversea chip makers is simply “wrong.”

“Tariffs are a penalty, while the CHIPS act is an incentive,” he said. “Incentives almost always work better than penalties. Also, you can put all the tariffs you want on chips, but it still takes three-to-four years to get a new fab up and running, and it’s extremely capital intensive.”

New semiconductor fabrication facilities cost from $20 billion to $40 billion, and many enterprises can’t afford that kind of investment without some form of subsidies or tax break, Gold said.

Additionally, every electronic device today has a chip in it, and so tariffs would likely increase the cost of products from cars and smartphones to toasters.

The CHIPS Act was passed overwhelmingly in 2022 by members of both houses of Congress to address computer chip supply chain shortages that surfaced during the COVID-19 pandemic. The legislation provided the US Department of Commerce (DoC) with $52.7 billion for a suite of programs under the CHIPS for America program to “revitalize” the US position in semiconductor research, development, and manufacturing.

“New fabs are a very high-risk venture, so with the CHIPS Act subsidies, the government is basically saying it will take on part of that risk,” Gold said.

To date, the DoC has allocated, but not dispensed, about $32 billion in funding among chipmakers, including Intel, Samsung, Micron, TSMC, and Texas Instruments, all of whom have unveiled plans for a number of new US chip fabrication plants. In return, those chip designers and makers have pledged about $300 billion in current and future projects in the US, according to the White House.

With the CHIPS Act spurring them on, the likes of Qualcomm, in partnership with GlobalFoundries, also said it would invest $4.2 billion to double chip production in its Malta, NY facility.

In addition to Trump’s opposition, House Speaker Mike Johnson said recently that Republicans will likely repeal the CHIPS Act. Johnson, who voted against the act, later walked his comments back, saying he would like to “streamline” it, according to The Associated Press.

Rep. Brandon Williams (R-NY) said he spoke to Johnson after his remarks were published. “He apologized profusely, saying he misheard the question,” Williams said in a statement. “He clarified his comments on the spot and I trust local media to play his full comments on supporting repatriation of chips manufacturing to America.”

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“As I have further explained and clarified, I fully support Micron coming to Central NY, and the CHIPS Act is not on the agenda for repeal,” Johnson said in his own statement. “To the contrary, there could be legislation to further streamline and improve the primary purpose of the bill — to eliminate its costly regulations and Green New Deal requirements.”

New York State has become a major hub of semiconductor development. Micron plans to invest $100 billion to build a memory chip fabrication plant in the state that will be the size of 40 football fields and create about 50,000 jobs. It may spend up to an additional $100 billion over the next 20 years on the facility. In addition, the Biden Administration just announced plans to spend about $825 million to create a flagship national semiconductor R&D center in upstate New York, where the government-funded NanoTech Complex already exists.

Micron highlighted the bipartisan support for the CHIPS and Science Act, with a spokesperson saying it’s “a law that represents an important step toward solidifying American semiconductor and technology leadership for decades to come.”

Repealing the legislation, in any event, would take an act of Congress, and the CHIPS Act has strong bipartisan support among senior republicans, including Senate Minority Leader Mitch McConnell. McConnell argued that bolstering US semiconductor production was vital for both national security and economic competitiveness.

Sen. Todd Young (R-IN) was a key CHIPS Act supporter who emphasized the importance of semiconductor manufacturing for both economic growth and national defense and pushed for the bill’s provisions to help American businesses compete globally. Young echoed others in heralding its “broad bipartisan support, and the massive private investments spurred since then have made the legislation even more popular.

“If there are any regulations that can be streamlined to create even more jobs from our growing semiconductor industry in Indiana and across the country, count me in. But I’m confident the CHIPS Act is here to stay,” Young said in a response to Computerworld.

The CHIPS Act has spurred $450 billion in private investment across 28 states, creating 58,000 jobs, according to the Semiconductory Industry Association. 

Despite widespread bipartisan backing, some members of Congress expressed concerns about certain provisions, such as the level of government subsidies or the potential for the bill to benefit only a few large tech companies. Still, the majority of both Democrats and Republicans recognized the strategic importance of boosting semiconductor production on US soil.

A DoC spokesperson pointed to the “overwhelming bipartisan support” for the act’s more than $400 billion in total investments as well as projections it will create more than 125,000 jobs. “Our team continues to implement this bipartisan law in accordance with statute, including announcing more than $36 billion in proposed funding for manufacturing incentives and several key R&D components. We will have more announcements in the coming weeks,” the spokesman said.

TSMC declined comment on the act’s future. Intel, which completed building a new fab in New Mexico and is awaiting CHIPS Act funds for that, was promised a total of $8.5 billion to support investments for fabs, packaging facilities and R&D centers among four states, including Arizona, Oregon, and Ohio.

Ohio is receiving a significant portion of the funding for semiconductor manufacturing. In particular, Intel is investing $20 billion to build two new semiconductor fabrication plants in Licking County, Ohio. Vice President-elect J.D. Vance is currently a US senator in his home state of Ohio.

“I’m betting that lawmakers, and especially Republican lawmakers from certain states that will benefit from the chips act (like Ohio and Arizona, and now New York), will have a lot of push back on [Trump’s] idea,” Gold said.

An Intel spokesperson pointed out that the idea behind the measure began during the first Trump Administration and it continues to maintain strong bipartisan support.“Restoring America’s semiconductor manufacturing leadership is integral to the country’s economic competitiveness and national security,” the spokesperson said. “As the only American company that designs and manufactures leading-edge chips, Intel has a critically important role to play, and we look forward to working with the Trump Administration on this shared priority.”

Over the past 30 years, the US share of global semiconductor production has fallen from 37% to just 12%, according to White House figures. Meanwhile, China’s share of chip manufacturing has grown nearly 50% over the past two years and now comprises about 18% of the world’s supply. That decline in domestic chip production was exposed by a worldwide supply-chain crisis during the Covid-19 pandemic that led to calls for reshoring manufacturing to the US — and ultimately the CHIPS Act.

Over the next three to four years, as new fabrication, packaging and R&D centers are built on US soil, the cost of production of semiconductors is likely to rise by 10% to 20%, according to Gold.

Additionally, it will cost 10% to 20% more to build chips in the US than the Far East, so it will make more sense to focus on higher-end and not commodity chips for US production. Unless Trump’s idea for tariffs is to use the money to help fund new fabrication plants in the US, which is not what the President-elect stated, it would be doing the very thing the CHIPS Act is already accomplishing, Gold said.