(Bloomberg) — Commerce Secretary Howard Lutnick has signaled he could withhold promised Chips Act grants as he pushes for companies in line for federal semiconductor subsidies to substantially expand their US projects, according to eight people familiar with the matter.
The Commerce chief wants firms that won awards from the 2022 Chips and Science Act to follow in the footsteps of Taiwan Semiconductor Manufacturing Co. (TSM, 2330.TW), which recently announced it will invest another $100 billion in US plants on top of a previous $65 billion pledge, the people said. Lutnick’s goal is to generate tens of billions of dollars in additional semiconductor investment commitments without increasing the size of federal grants, said the people, who asked not to be named discussing private conversations.
Commerce Secretary Howard Lutnick.
As he negotiates, Lutnick’s team has suggested that he could scrap disbursement of subsidies that have already been agreed upon, according to some of the people. At the same time, Lutnick has expressed interest in expanding a separate 25% tax credit from the Chips Act, some of the people said. That’s worth more to most companies than the direct funding awards. Major changes to the tax credit would require an act of Congress.
The Commerce Department didn’t respond to requests for comment.
Lutnick has previously said that he intends to review Chips Act awards in order to get what he calls the “benefit of the bargain.” President Donald Trump — who has called on Congress to repeal the law — on Monday signed an executive order focused in part on “negotiating much better Chips Act deals than the previous administration.”
The directive established a new office within Commerce to encourage companies to make large investments in the US. The United States Investment Accelerator will facilitate projects of more than $1 billion and also administer semiconductor subsidies, the White House said.
“This rebrand gives the president a permission structure to support the underlying policy despite previously attacking the Chips Act,” said Jim Secreto, who served as deputy chief of staff to former President Joe Biden’s commerce secretary.
The bipartisan law set aside $52 billion to revitalize the American semiconductor industry after decades of production shifting to Asia. The majority of that is for direct funding awards to companies, which are designed as reimbursements for private expenditures and are supposed to be doled out over time as projects hit negotiated milestones.
Many companies haven’t hit any new benchmarks since Trump took office, meaning they haven’t yet expected to receive any money under the new administration. But there are signs that Lutnick’s team is slow-walking the eventual disbursement of that funding as he reviews award agreements.
In one case, a small manufacturer that signed a binding Chips Act agreement was wrapping up discussions around payment timing before Trump took office, some of the people said. Those talks are now delayed, and it’s unclear when the money might come.
There’s also a host of firms that reached preliminary agreements under Biden but didn’t sign final accords, and are now unsure about when — or whether — they’ll receive funding. One of them, North Carolina-based Wolfspeed Inc. (WOLF), said last week that its $750 million deal is likely to evolve, but did not provide more specifics, according to the Triangle Business Journal.
TSMC, meanwhile, hit a milestone in late February that corresponds to a $750 million disbursement from its larger Chips Act award, people familiar with the matter said. The status of that payment, which was originally expected in early March, is unclear. A TSMC spokesperson declined to comment on whether the company has received the money.
Federal spending data shows that Commerce Department expenditures had been relatively flat since Trump took office, until a roughly $770 million outlay late last week.
Biden’s team doled out around $4.3 billion in Chips Act funds and announced several dozen preliminary and final awards before leaving office, in a blitz of deals that the previous administration hoped would limit disruptions to the program once Trump took over.
Major beneficiaries include TSMC, Intel Corp. (INTC), Micron Technology Inc. (MU), Samsung Electronics Co. (SSNLF, 005930.KS), GlobalFoundries Inc. (GFS) and Texas Instruments Inc. (TXN), all of which are slated to receive more than $1 billion in grants. Together, those companies account for the lion’s share of more than $400 billion in pledged private-sector investments that the Chips Act has spurred.
But Trump, who argues tariffs are a better incentive for companies to build factories on American soil, wants Congress to scrap the initiative — an unlikely prospect given strong bipartisan support for the program on Capitol Hill.
Trump and Lutnick both credited the threat of tariffs on foreign-made chips with TSMC’s decision to expand from three to six plants in Arizona, plus other investments in chip packaging and research. TSMC, though, has said its latest investment is based on US market demand.
Trump is poised to unveil tariffs targeting other countries on April 2, and he’s teased duties on chips “down the road.” Whether companies respond to those threats by announcing more investments is an open question.
Samsung last year downsized its planned Texas investment, which led to a smaller Chips Act grant than originally anticipated. The company’s semiconductor division has struggled in recent months as it loses ground to rivals. Samsung representatives declined to comment.
Micron, meanwhile, originally planned as many as four facilities in New York, but last year began slow-walking plans for the third plant as it talked with Japanese officials about standing up a similar facility there. Micron has publicly committed to the first two New York facilities plus another plant in Idaho, all of which are covered by its Chips Act award. Micron declined to comment.
Thomas Caulfield — the executive chairman at GlobalFoundries, where he previously served as chief executive officer — has said that tariffs, combined with Chips Act grants and a 25% investment tax credit also offered from the program, could “create the dynamics to make the demand want to come home.”
In almost all cases, Chips Act grants are the lesser of the subsidies companies will receive. The much bigger chunk of money comes from the 25% tax credits, which also aren’t contingent on environmental or labor conditions that Republicans have long argued should not be part of the grant application process.
Lutnick has indicated he’s open to expanding the tax credit, people familiar with the matter said, but he has yet to offer specifics.
The current guidelines allow companies to claim the credit for projects — including chip and wafer production — that break ground by the end of 2026. A bipartisan group of lawmakers has introduced a bill that would extend the credits to semiconductor R&D in addition to manufacturing, and would also apply the credits to any projects that break ground by the end of 2036 — giving companies another decade to get started.
“The credit is essential,” Peter Cleveland, a senior vice president at TSMC, said at an event last week. Developing the US semiconductor industry “depends on continued collaboration with this administration and future administrations,” he said — “and the form that that collaboration should take, should be through extension of the credit in the code.”
There is no legislative cap on the amount companies can claim, so the fiscal implications of any expansion are potentially quite significant. The Peterson Institute for International Economics estimated in June 2024 that the credit could cost around $85 billion in foregone revenue — more than three times the original projection of the Congressional Budget Office. That’s a function of how much investment the law has spurred.
—With assistance from Yoolim Lee, Jane Lanhee Lee and Dina Bass.
