The Chips Act provides billions of dollars in funding and tax benefits to semiconductor companies and aims to revitalize semiconductor manufacturing in the United States. However, Trump last month Joe Rogan ExperienceCriticized the Chips Act as a “very bad policy” and argued that high tariffs should have been imposed on foreign semiconductor manufacturers instead of supporting new manufacturing facilities and R&D centers.
Trump compared the semiconductor industry to the automobile industry and said tariffs were an effective way to encourage the return of manufacturing, saying, “Spending huge amounts of money to have people make chips is not the right way.” “If we impose very high tariffs, they will come and build factories for nothing,” he said. He also added, “The United States has made wealthy companies spend billions of dollars to build factories, but foreign companies do not bring superior technology to the United States.”
Trump continued by claiming, “Taiwan has taken away America’s semiconductor industry, and wants the United States to protect them, but not pay for it.” This appears to refer to Taiwan’s TSMC, the world’s largest semiconductor manufacturer. Computerworld reached out to the Trump campaign for comment, but did not receive a response.
TSMC’s investment in the U.S. and the role of the Chip Act
TSMC is currently building two major semiconductor manufacturing facilities in Arizona. One is a factory based on the 5nm process and the other is based on the 3nm process. TSMC plans to receive approximately $6.6 billion in funding through the Chips Act, and in return, it will introduce the most advanced 2nm process technology to the United States and plans to add a third manufacturing facility.
TSMC CEO CC Wei recently told investors that the first Arizona plant is expected to begin mass production in early 2025. “We are confident that we will provide the same manufacturing quality and reliability as our factory in Taiwan,” Wei said. The second and third plants will utilize more advanced technologies in line with customer demand and are planned to begin production by 2028 and 2030, respectively.
Jack Gold, senior analyst at J. Gold Associates, pointed out that former President Trump’s plan to impose tariffs on foreign semiconductor manufacturers is the “wrong approach,” adding, “Tariffs are a penalty, while the Chips Act is an incentive. Incentives are always more effective than penalties. “Also, no matter how many tariffs are imposed on semiconductors, it takes at least 3 to 4 years to operate a new semiconductor factory, and a huge amount of capital investment is required,” he explained.
It costs $20 billion to $40 billion to build a new semiconductor factory, Gold said, adding that most companies would find it difficult to afford this level of investment without support such as subsidies or tax breaks. Additionally, since all electronic devices today contain semiconductors, tariffs are likely to result in higher prices for products such as cars, smartphones, and toasters.
The Chips Act was overwhelmingly passed by the Senate and House of Representatives in 2022 to address the semiconductor supply chain shortage that emerged during the COVID-19 pandemic. The law provides $52.7 billion to the U.S. Department of Commerce to “revitalize” America’s semiconductor research, development, and manufacturing capabilities through the CHIPS for America program.
“New semiconductor factories are very risky undertakings,” Gold said. “The CHIPS Act subsidies mean the government is willing to take on some of that risk,” he said.
Achievements and bipartisan support of the CHIPS Act
To date, the Commerce Department has allocated approximately $32 billion in funding to semiconductor manufacturers, but no actual payments have been made. The funds were allocated to major companies including Intel, Samsung Electronics, Micron, TSMC, and Texas Instruments, which have revealed plans to build new semiconductor factories in the United States. According to the White House, these semiconductor designers and manufacturers have pledged to invest about $300 billion in projects underway or planned in the United States.
Prompted by the CHIPS Act, Qualcomm said it plans to invest $4.2 billion in partnership with GlobalFoundries to double chip production at its plant in Malta, New York.
Meanwhile, in addition to former President Trump’s opposition, House Speaker Mike Johnson recently mentioned the possibility that the Republican Party would repeal the CHIPS Act. According to the Associated Press, Johnson, who voted against the law, later walked back his comments and said he wanted to “reorganize” the law “to make it more effective.”
New York State Republican Representative Brandon Williams said in a statement that he had discussed his comments with Johnson, adding, “Johnson misunderstood the question and apologized profusely. “Johnson corrected his remarks on the spot and made it clear that he supports the return of semiconductor manufacturing to the United States,” he said.
“I fully support Micron’s presence in Central New York, and plans to repeal the CHIPS law are not on the agenda,” Johnson said in a statement. Rather, there could be additional legislation to improve the main objectives of this law and eliminate costly regulations and Green New Deal requirements,” he added.
New York State is emerging as a major base for semiconductor development. Micron plans to invest $100 billion to build a memory semiconductor manufacturing plant in New York State the size of 40 football fields. It is expected that approximately 50,000 jobs will be created through this. There is also the possibility of investing an additional $100 billion to expand facilities over the next 20 years. In addition, the Biden administration announced plans to invest about $825 million to establish a semiconductor R&D center in upstate New York, where a government-supported nanotech complex is already located.
A Micron spokesperson emphasized bipartisan support for the Semiconductor and Science Act, saying, “This law represents an important step toward solidifying U.S. semiconductor and technology leadership for decades to come.”
In any case, repealing the law would require congressional approval. The CHIPS Act has strong bipartisan support among senior Republicans, including Senate Minority Leader Mitch McConnell. McConnell argued that strengthening U.S. semiconductor production is essential to both national security and economic competitiveness.
Republican Senator Todd Young of Indiana, a key supporter of the CHIPS Act, said semiconductor manufacturing is important for both economic growth and national defense, and actively supported the implementation of the bill’s provisions to help American companies remain competitive in global markets. “There was broad bipartisan support, and the subsequent massive private investment made the bill even more popular,” Young said.
“I will actively participate if regulations can be simplified to create more jobs due to the growth of the semiconductor industry,” Young said in a response to Computerworld. However, I am confident that the CHIPS law will be maintained in the future.”
“Chips Act is essential for economic competitiveness and security”
According to the Semiconductor Industry Association, the CHIPS Act has so far attracted $450 billion in private investment in 28 states, creating 58,000 jobs.
Despite broad bipartisan support, some lawmakers were concerned about the level of government subsidies or certain provisions that the bill could benefit only a few large technology companies. Nonetheless, many Democratic and Republican lawmakers recognized the strategic importance of increasing domestic semiconductor production.
A Commerce Department spokesperson emphasized that the CHIPS Act has “overwhelming bipartisan support” with a projected total investment of more than $400 billion and the creation of more than 125,000 jobs. “We are continuing to implement this bipartisan bill into law, including announcing more than $36 billion in funding for manufacturing incentives and several key R&D elements,” he said. “More announcements will be made in the coming weeks.”
TSMC declined to comment on the future of the Chips Act. Meanwhile, Intel has completed construction of a new semiconductor factory in New Mexico and is awaiting funding under the Chips Act. Intel has been promised a total of $8.5 billion in support to invest in factories, packaging facilities and R&D centers in four states, including Arizona, Oregon and Ohio.
Ohio is a representative region receiving significant funding for semiconductor manufacturing. In particular, Intel is investing $20 billion to build two new semiconductor manufacturing plants in Licking County, Ohio. Vice President-elect JD Vance is currently serving as a senator from Ohio.
“Republican lawmakers based in states that would benefit from the CHIPS Act, such as Ohio, Arizona and New York, are likely to strongly oppose Trump’s idea,” Gold said.
An Intel spokesperson said the idea for the Chips Act originated during the first term of the Trump administration and still maintains strong bipartisan support. “Restoring America’s leadership in semiconductor manufacturing is essential to the nation’s economic competitiveness and security. “As the only U.S. company that designs and manufactures advanced semiconductors, Intel has a critical role to play, and we look forward to working with the Trump Administration on this shared priority.”
According to White House statistics, over the past 30 years, the United States’ share of global semiconductor production has decreased from 37% to 12%. Meanwhile, China’s share of semiconductor manufacturing has increased by about 50% over the past two years and now accounts for about 18% of global supply. This decline in semiconductor production in the United States revealed a global supply chain crisis during the COVID-19 pandemic, leading to calls for reshoring to bring manufacturing back to the United States and ultimately the enactment of the Chips Act.
According to Jack Gold, semiconductor production costs are expected to increase by 10 to 20 percent over the next three to four years as new semiconductor manufacturing plants, packaging facilities and R&D centers are built in the United States.
Additionally, the cost of manufacturing semiconductors in the United States is 10 to 20 percent more expensive than in East Asia, so it makes more sense to focus on producing high-end semiconductors in the United States rather than general semiconductors.
Gold pointed out, “Unless Trump’s idea of imposing tariffs is to use tariff revenue to build new semiconductor factories in the United States, this would simply be a repeat of what the Chips Act already accomplishes.”
editor@itworld.co.kr
Source: www.itworld.co.kr
