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Trump Calls for End to $52 Billion Chips Act Subsidy Program
Trump Calls for End to $52 Billion Chips Act Subsidy Program ·Bloomberg
Mackenzie Hawkins
5 min read
(Bloomberg) -- President Donald Trump called for ending a bipartisan $52 billion semiconductor subsidy program that’s spurred more than $400 billion in investments from companies like Taiwan Semiconductor Manufacturing Co. and Intel Corp.
“Your Chips Act is a horrible, horrible thing,” the president said in a prime-time address to Congress on Tuesday. Trump implored US House Speaker Mike Johnson to get rid of the legislation and use “whatever is left over” to “reduce debt or any other reason.”
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His remarks were met with applause in a chamber that passed the Chips and Science Act less than three years ago. Vice President JD Vance, whose home state of Ohio won a massive Intel project thanks to the law, stood up to show his support for its revocation.
The Chips Act is among the most significant US forays into industrial policy in more than a generation. It set aside $39 billion in grants — plus loans and 25% tax breaks — to revitalize American semiconductor manufacturing, as well as $11 billion for chip research and development. The aim was to reduce reliance on Asia for electronic components that power everything from smartphones to massive data centers.
Trump, however, has consistently derided a program he regards as a waste of government funds, arguing tariffs would achieve the same outcome while filling coffers. Republicans have also indicated that they want to repeal what they see as “social” provisions of the Chips Act. That could involve eliminating labor-friendly regulations or environmental requirements.
Officials on both sides of the aisle have touted the Chips Act as crucial to US national and economic security, and Trump could have a hard time getting congressional support to repeal it. Dozens of GOP lawmakers voted for the measure, and many red districts have won factories or other projects supported by the law.
That includes South Korea’s Samsung Electronics Co. and SK Hynix Inc., which have committed to multibillion-dollar projects in Texas and Indiana that were contingent on funding and support from the US government. Company representatives declined to comment on the president’s remarks.
Trump, favoring tariffs over incentives, has signaled that import levies on chips could come as soon as next month. Companies can avoid those duties, he has said, by building factories on American soil. He has not offered additional details.
On Monday, Trump credited the tariff threats for TSMC’s decision to invest $100 billion in the US, on top of a previous $65 billion commitment. He touted that project in his address Tuesday, referencing the full $165 billion figure. “We’re giving them no money,” Trump said. “All that was important to them was they didn’t want to pay the tariffs.”
A TSMC spokesperson declined to comment.
The company originally announced plans for a $12 billion US site during Trump’s first term and expanded that project to three factories under Biden. To support those facilities, TSMC struck an agreement with Biden officials for $6.6 billion in Chips Act grants and $5 billion in loans.
As is the case for other Chips Act awards, the funding is supposed to be disbursed over time, as TSMC hits negotiated project milestones. The company received $1.5 billion before Biden left office.
Trump did not specify whether he would attempt to claw back money that’s already been disbursed, renege on remaining incentives to which the government has already committed, or simply not provide additional support for the chipmaker’s latest investment. Commerce Secretary Howard Lutnick said Monday that the newly announced projects — three additional chip plants, plus R&D and advanced packaging sites — won’t win federal funds.
“The main uncertainty is the future of TSMC,” said Xin-Yao Ng, an investment director at abrdn plc. “One long-time competitive advantage was their clustering in Taiwan, where labor costs are still reasonable, construction costs are cheaper, government is supportive, and they can find more workers with vocational training. It’s completely different in the US if they are to shift more manufacturing. Subsidies from US were to be crucial to help mitigate some of the higher costs and challenges.”
TSMC is among 20 companies that reached binding Chips Act agreements with Biden officials. The deals, which represent more than 85% of the manufacturing incentives available under the program, are designed to support leading-edge facilities by companies like TSMC, Intel, Samsung and Micron Technology Inc. — as well as older-generation factories by the likes of GlobalFoundries Inc. and Texas Instruments Inc.
Companies have generally viewed those agreements as ironclad — regardless of who’s in office. But some of them have worried that the Trump administration could seek to modify the terms, Bloomberg has reported. Lutnick has said he cannot commit to honoring existing contracts without reviewing them first.
That review is ongoing, and Lutnick’s intentions for the initiative remain unclear. So far, his questions to program staff have focused on the rationale behind award decisions and the government’s legal authority to claw money back, Bloomberg has reported. The current Chips Act team, meanwhile, has been preparing a list of potential adjustments to the funding application process and final contracts that would be minimally disruptive.
A spokesperson for GlobalWafers Co., which won $406 million from the Chips Act for factories in Texas and Missouri, said the Taiwanese company is committed to its expansion strategy and views any changes to the Chips Act as “unlikely.”
But if the law were to be modified in some way, the spokesperson said, “we would reassess future investments, including evaluating US market demand, pricing, and potential tariffs if production were moved outside the US.”
--With assistance from Jane Lanhee Lee, Yoolim Lee, Winnie Hsu and Vlad Savov.
(Updates with Trump’s earlier comments on the Chips Act in fifth paragraph)
