The United States government recently finalized multi-billion dollar agreements with semiconductor giants TSMC and GlobalFoundries as part of the CHIPS and Science Act, a 2022 initiative designed to strengthen the country’s semiconductor manufacturing capabilities. However, with President-elect Donald Trump preparing to take office, the program’s future faces uncertainty. Trump’s skepticism towards the CHIPS Act and a Republican-controlled Congress’s potential resistance to subsidies could impact the trajectory of these investments. This latest development underscores both the progress and challenges facing the U.S. semiconductor sector.
The CHIPS and Science Act, passed in 2022, earmarked $280 billion in funding for chipmakers willing to develop advanced manufacturing facilities in the United States. As the global demand for semiconductor chips skyrocketed, the initiative aimed to restore a domestic supply chain that had gradually shifted overseas, with Taiwan and South Korea dominating production. The CHIPS Act reflects a strategic vision for national security and economic resilience, given the potential risks associated with supply dependence on regions like Taiwan, which faces geopolitical pressures from China.
Under the CHIPS Act, semiconductor companies seeking funds must limit their operations in countries deemed adversarial to the United States, such as China and Russia. The legislation comes at a time when China is expanding its semiconductor capabilities, prompting concerns over technological competition and potential supply vulnerabilities. The U.S. intends to produce at least 20 percent of the world’s advanced semiconductors by the decade’s end, a goal that requires substantial infrastructure investments and government support.
TSMC and GlobalFoundries: Leading Beneficiaries of the CHIPS Act
As part of this historic initiative, TSMC and GlobalFoundries are among the first to benefit from CHIPS Act funds. According to recent reports from Reuters and Bloomberg, the U.S. government has finalized arrangements for TSMC to receive a $6.6 billion grant and a $5 billion loan to build an advanced semiconductor fabrication plant, or “fab,” in Arizona for 2-nanometer chips. This technology is at the cutting edge of semiconductor manufacturing, essential for powering next-generation electronics and AI applications.
GlobalFoundries, a key U.S.-based chipmaker, will receive $1.5 billion in funding to establish a new semiconductor fab in New York and to expand its Vermont facilities. This funding is crucial for GlobalFoundries as it scales its production to meet rising demand, particularly for clients within the defense and automotive industries. These investments align with the broader CHIPS Act vision of reducing U.S. reliance on foreign manufacturers and building a robust domestic semiconductor supply chain.
Challenges and Delays in CHIPS Act Funding
Despite the ambitious targets set by the CHIPS Act, the program has encountered significant delays. Although major companies like Intel and GlobalFoundries have secured large sums in committed funding, they have yet to receive the actual disbursements. Intel, one of the largest beneficiaries with an $8.5 billion award, announced its grant in March but has faced a waiting period for the funds. According to an analysis from earlier this year, around 40 percent of CHIPS Act funding has suffered delays, some of them indefinite.
The administrative and logistical hurdles highlight the complexity of deploying large-scale industrial funding. Moreover, as the U.S. approaches a transfer of power with the inauguration of President-elect Donald Trump, the CHIPS Act’s future is now under scrutiny. Trump has previously criticized subsidy programs like the CHIPS Act, favoring tariffs as a means to promote domestic manufacturing over government grants and loans. As a result, it is unclear whether future payments under the CHIPS Act will proceed smoothly under the new administration.
President-elect Donald Trump’s criticism of the CHIPS Act could be a harbinger of policy shifts that may limit the program’s scope or funding. Trump’s preference for tariffs over subsidies reflects a belief in incentivizing domestic production through trade barriers rather than government assistance. Although he has not specifically targeted the CHIPS Act, his broader stance on federal subsidies suggests potential friction with its implementation.
Republican House Speaker Mike Johnson initially expressed intentions to repeal the CHIPS Act, adding to concerns over the program’s longevity. However, Johnson recently softened his stance, potentially signaling a compromise within the Republican-controlled Congress. Nevertheless, the shifting political climate creates uncertainty for companies relying on CHIPS Act funding to build infrastructure and expand operations.
China’s Response and Industry Skepticism
China’s response to the CHIPS Act has been critical, viewing it as an effort by the U.S. to counter Chinese technological advancements and as indicative of “outdated Cold War thinking.” The CHIPS Act’s restrictions on doing business in China have caused concerns among chipmakers with extensive global operations. Companies like TSMC and Nvidia have raised doubts about the feasibility of fully severing technological ties with China, given the interdependent nature of global semiconductor markets.
While the CHIPS Act envisions a self-reliant U.S. semiconductor industry, the reality is that these companies still depend on global supply chains for equipment, raw materials, and components. The challenges in shifting all production to the United States without losing access to international markets make the CHIPS Act’s vision challenging to achieve in the near term.
Despite the concerns, the CHIPS Act has undoubtedly catalyzed a wave of unprecedented investments in U.S. semiconductor infrastructure. With companies like TSMC, GlobalFoundries, and Intel receiving substantial funding commitments, the program marks one of the most significant industrial policy initiatives in recent U.S. history. If the program continues, the United States could achieve its goal of producing a significant share of the world’s advanced semiconductors by 2030.
However, delays in funding and political opposition could hamper the CHIPS Act’s impact. The current political landscape may lead to further scrutiny of government subsidies, particularly as Trump and a Republican Congress take office with a different economic agenda. For semiconductor companies like TSMC and GlobalFoundries, the coming months will determine whether the U.S. remains committed to subsidizing domestic manufacturing or pivots to other approaches.
The CHIPS Act represents an ambitious effort to rebuild the U.S. semiconductor industry in response to global competition and supply chain vulnerabilities. The recent $13 billion in awards to TSMC and GlobalFoundries underscores the scale of investment needed to reach this goal. However, political changes and potential funding delays create uncertainty for the program’s long-term success. As the U.S. semiconductor sector navigates these challenges, the CHIPS Act’s future will serve as a litmus test for the country’s commitment to technological self-sufficiency and industrial resilience.
