Former President Donald Trump recently took an unexpected stance against the CHIPS Act, a bipartisan initiative aimed at strengthening U.S. semiconductor manufacturing. During his address to Congress, Trump called the law a “horrible, horrible thing” and suggested repealing it, catching many lawmakers off guard. His remarks particularly surprised Republicans, who had previously been reassured of his administration’s support.
The CHIPS Act, signed by President Joe Biden in 2022, was designed to revive America’s semiconductor industry by investing $50 billion into domestic production. The initiative sought to reduce reliance on Asian manufacturers and prevent future supply chain disruptions, like those seen during the pandemic. Following its approval, companies set up semiconductor plants in Arizona, New York, and Ohio, with substantial federal grants aiding their development.
Industry Concerns Over Funding and Contracts
Trump’s sudden opposition has sparked concerns among semiconductor executives, who now fear the administration might pull back funding or renegotiate contracts. According to insiders, legal teams are reviewing agreements to assess whether the government can alter or cancel them.
Senator Todd Young, a key Republican supporter of the CHIPS Act, sought clarification from the White House regarding Trump’s remarks. He emphasized the program’s success, stating, “If adjustments are needed, I support that, but the CHIPS Act is one of the greatest achievements of our time.”
The United States, once a leader in semiconductor production, saw much of its chip manufacturing shift to Asia in the 1980s. The CHIPS Act was meant to reverse this trend by providing financial incentives to companies investing in U.S. manufacturing. However, Trump’s latest comments have introduced uncertainty into the industry’s future.
Layoffs and Changes in CHIPS Program
Even before Trump’s speech, his administration had begun scaling back the CHIPS program. In February, Michael Grimes, a senior Commerce Department official, conducted unusual evaluations of CHIPS Program Office employees, reportedly asking them to prove their intelligence with SAT scores or solve math problems. Many found the process unprofessional.
Shortly after, the Commerce Department laid off 40 CHIPS office employees—nearly a third of the workforce—raising concerns about the program’s long-term viability. Additionally, internal discussions have considered removing certain funding requirements, such as hiring unionized construction workers and providing childcare benefits.
The Industry’s Response and Future Prospects
Following Trump’s comments, the Semiconductor Industry Association held an urgent meeting with its member companies. While some attributed Trump’s stance to political rivalry with Biden, others worried about increased scrutiny of their projects. Despite these concerns, many industry leaders believe their legal agreements with the government remain secure.
So far, the CHIPS Act has provided over $36 billion in federal subsidies to major semiconductor firms like Intel, Samsung, Micron, and Taiwan Semiconductor Manufacturing Company (TSMC). These companies have, in turn, pledged to invest hundreds of billions in U.S. production.
Trump’s Tariff Proposal and Its Impact
Trump has suggested replacing CHIPS Act subsidies with tariffs on foreign-made semiconductors, arguing that higher import costs would encourage companies to manufacture in the U.S. He claimed this approach had already influenced TSMC to increase its investment in Arizona by $100 billion and double its planned factories from three to six.
However, industry experts are skeptical. TSMC had already secured land and planned expansions based on projected demand from clients like Apple and Nvidia. According to sources, the company’s decision to accelerate its investment was primarily driven by customer commitments rather than tariff concerns.
Challenges of a Tariff-Based Approach
Many experts argue that tariffs may not be an effective solution. The U.S. imports relatively few raw semiconductor chips, as most are shipped to Asian factories where they are assembled into finished products like smartphones and laptops before being exported to the U.S.
Since the election, industry leaders have been working on strategies to demonstrate the CHIPS Act’s benefits to Trump. The legislation was originally driven by Trump administration officials who encouraged TSMC to invest in the U.S., leading to broader efforts to secure funding for domestic chip production.
“We need to ensure policymakers in Washington recognize the importance of continued investment in our industry,” said Deirdre Hanford, CEO of Natcast, a nonprofit focused on semiconductor technology development.
