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."
Tariffs and trade barriers
Trump has also hinted at stronger trade barriers, suggesting increased tariffs on semiconductor imports to shield US producers. He said, “When I see us paying a lot of money to have people build chips, that’s not the way. You didn’t have to put up 10 cents, you could have done it with a series of tariffs. In other words, you tariff it so high that they will come and build their chip companies for nothing.” Experts had expressed concerns that if Trump comes to power, he might introduce such changes, which could lead to disruption of existing supply chains and impact prices. Faruqui adds, that imposing tariffs would bring a blow to Taiwan semi-players (materials, equipment, packaging, EMS, etc) and possibilities of harsher tariffs on China are already hinted at.
Even during his earlier stint as the President, Trump’s administration had imposed extensive sanctions and restrictions on China, particularly targeting the tech sector. This was aimed to limit China’s access to advanced technologies crucial for its tech and defence advancements.
Wang of Counterpoint Research adds, “Trump's comments about chips coming from Taiwan and his overall analysis of the geopolitical dynamics in the Asia Pacific region come from his overall isolationist perspective. This will have ramifications for the global security infrastructure but also trade relations. The belligerent tone on Taiwan's semis industry is not out of line with his other attacks on the economic policies of the EU, China, Japan, and Mexico.”
US-India ties under iCET
To elevate and expand strategic technology partnership and defence industrial cooperation between the governments, businesses, and academic institutions of India and US, in May 2022, US President Joe Biden and Indian Prime Minister Narendra Modi announced the US-India initiative on Critical and Emerging Technology (iCET). Amidst strengthening the innovation ecosystem, defence innovation and technology cooperation, space, and next-generation telecommunication, iCET was to also focus on building a resilient semiconductor supply chain.
This included enhancing bilateral collaboration on resilient semiconductor supply chains; supporting the development of a semiconductor design, manufacturing, and fabrication ecosystem in India; and leveraging complementary strengths, both countries intend to promote the development of a skilled workforce that will support global semiconductor supply chains and encourage the development of joint ventures and technology partnerships on mature technology nodes and packaging in India. Additionally, a task force was to be formed by the US Semiconductor Industry Association (SIA) in partnership with the India Electronics Semiconductor Association (IESA) with participation from the Government of India Semiconductor Mission to develop a readiness assessment to identify near-term industry opportunities and facilitate longer-term strategic development of complementary semiconductor ecosystems. It was also to make recommendations to the Department of Commerce and the India Semiconductor Mission on opportunities and challenges to overcome in order to further strengthen India’s role within the global semiconductor value chain, and will also provide input to the US-India Commercial Dialogue.
Even during Prime Minister Narendra Modi’s recent visit to the US in September this year, the two leaders held talks and signed a pivotal agreement to set up a semiconductor fabrication plant in India. The plant will be established with support from the India Semiconductor Mission as well as a strategic technology partnership between Bharat Semi, 3rdiTech, and the US Space Force. The fab will be established with the objective of manufacturing infrared, gallium nitride and silicon carbide semiconductors. Both President Biden and Prime Minister Modi hailed this watershed arrangement that will be focused on advanced sensing, communication, and power electronics for national security, next-generation telecommunications, and green energy applications.
Given Trump’s US-first approach, some experts have expressed concerns about the collaboration between the two nations. But Faruqui of Fab Economics is optimistic as he believes collaboration with India will remain healthy in either presidency as it serves the China + 1 direction.
Contrary to Faruqui’s views, Wang believes “While India continues to enjoy good relations with candidates of either party, Trump did mention in interviews that he viewed India as carrying out a 'predatory' economic policy on the US in a similar fashion to the EU, China, Japan, etc; However due to the relatively lower volume of trade between the two countries, attention to and impact from a potential recalculation of US-India trade relations should be secondary on the Trump administration's agenda.”
With Trump on the verge of returning to the presidency, his focus on achieving semiconductor independence will drive an ‘America-first’ agenda. This protectionist approach is likely to significantly influence the strategic direction of the global semiconductor industry.
