During his first speech to the joint U.S. Congress, President Donald Trump called on repealing the CHIPS and Science Act, a law passed during the Biden Administration to help bring back semiconductor manufacturing domestically inside the U.S.
"Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars, and it doesn't mean a thing. They take our money, and they don't spend it," Trump said in the speech to Congress. "You should get rid of the CHIPS Act and whatever is left over, Mr. Speaker, you should use it to reduce debt."
Trump said that there should not be any monetary incentive to build semiconductor factories in the U.S. instead suggesting that avoiding tariffs would be enough motivation to build fabs domestically.
TSMC, the world’s largest chipmaker and foundry, pledged to spend a total of $165 billion on five chip fabs in Arizona. However, TSMC has received about $1.5 billion of the $6.6 billion in direct funding it was granted through the CHIPS Act.
TSMC is looking to mitigate geopolitical risks by expanding to new territories such as the U.S., Europe and building at least two fabs in Japan.
U.S. chip growth incoming
According to market research firm TrendForce, with the $165 billion that TSMC is planning to spend in the U.S., America is likely to expand its advanced semiconductor capacity to 22% of the global market share by 2030.
This growth will not just come from TSMC but also from the ramping up of subsidies given to semiconductor manufacturing companies expanding current fabs or building new fabs domestically.
Simultaneously, Taiwan’s advanced process share is expected to decline to 58% while its process share will drop to 30% as U.S. and China ramp up chipmaking capabilities.
This includes:
- Intel’s two fabs in Arizona
- Samsung building a fab in Tyler, Texas
- Micron’s fabs in Idaho and New York
- GlobalFoundries’ new fabs in New York and Vermont
- Three fabs being constructed by TI
Why it matters
The biggest beneficiaries of the CHIPS Act so far, not surprisingly, are the major foundry vendors that are either expanding operations domestically in America or building completely new fabs from scratch. The idea is that if the supply chain is located regionally in the U.S. and a geopolitical event in Taiwan or Korea happens or export restrictions continue to hamper relations with China, semiconductors will still be able to flow to American interests.
According to the Semiconductor Industry Association (SIA), currently the U.S. manufacturers less than 10% of all chips globally. If nothing is done to change the regional dynamics, this percentage will likely fall even further.
The CHIPS Act idea emerged after COVID-19 lockdowns, where the supply chain was revealed to be heavily flawed due to the aggregation of semiconductor manufacturing in Asia. During COVID-19, the lockdowns resulted in chip shortages that lasted nearly three years impacting various sectors including automotive and consumer electronics.
The idea was that if regional manufacturing were to become a reality, it would result in a more resilient chip supply chain where if one region experiences a natural disaster or geopolitical issue, the other regions would be able to labor the weight of the overall supply chain without throwing things into chaos.
Many experts agree that not only was the CHIPS Act important to improving and expanding semiconductor manufacturing in the U.S. A second CHIPS Act or something equivalent would likely be needed to continue the momentum of companies building domestically.
President Trump’s comments may put doubt into a future CHIPS Act let alone what happens to the remaining funding of the original CHIPS Act.
