Are Semiconductors in trouble under Trump?
Can the CHIPS Act keep its momentum under Trump’s leadership?
TSMC in the U.S.: Big Bucks, Big Challenges
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On Monday, Donald Trump officially returned to the White House! This raises fresh questions about the future of Biden’s economic legacy. Among them, the CHIPS and Science Act—a cornerstone of America’s semiconductor strategy—stands out. The Biden administration had scrambled to allocate nearly $40 billion to chipmakers before the transition. As one of the largest industrial policy bets in decades, the CHIPS Act could very well become Biden’s most enduring economic achievement.
But Trump’s stance on the CHIPS Act is anything but subtle. On the campaign trail, he slammed the Act as a "bad deal," arguing that handing out subsidies to already-wealthy corporations might not deliver the intended results. Instead, Trump championed a tariff-driven approach, suggesting that imposing tariffs on imported semiconductors would have been a more effective—and straightforward—strategy to boost domestic manufacturing.
Now, the fate of these funding commitments hangs in the balance. In today’s newsletter, we’ll take a closer look at the CHIPS Act, its results so far, and how TSMC—one of the world’s semiconductor giants—has fared in the U.S. under this ambitious program. Let’s dive in!
CHIPS Act at a Glance
The CHIPS Act, passed in 2022, earmarked a plan of $52.7 billion to revive America’s semiconductor industry. Here’s how that pie is sliced:
Manufacturing Incentives ($39 billion): Subsidies and tax benefits encourage companies like TSMC, Samsung, and Intel to build or expand U.S. operations.
Research and Innovation ($11 billion): Investments in cutting-edge research hubs like the National Semiconductor Technology Center (NSTC) aim to lead breakthroughs in chip design and materials.
Defense and Supply Chain Security ($2 billion): Funds are allocated to safeguard critical infrastructure and national defense.
Tax Benefits (25% Credit): Firms investing in domestic semiconductor manufacturing enjoy significant tax relief, reducing operational costs.
🚀 What’s the Deal So Far?
As the Biden administration wrapped up its term, the Department of Commerce has raced to allocate nearly $40 billion in funding to chipmakers.
And the results? Pretty impressive:
Private investment has surged by $450 billion, giving the sector a much-needed cash injection.
Subsidies have shaved 30% off the cost difference between U.S. and Asian chip fabs.
By 2032, the U.S. could produce 28% of the world’s most advanced chips (those tiny ones under 10 nanometers), up from basically zilch in 2022.
Challenges Looming on the Horizon
Despite these achievements, the CHIPS Act’s five-year timeline feels tight. Building a cutting-edge fab alone can take five years, and maintaining momentum requires sustained funding. Industry leaders worry about the expiration of the 25% tax credit in 2027 and the escalating competition from China, which invests exponentially more in its semiconductor ambitions.
The previous government remains optimistic, likening the Act to the initial push of a "flywheel" that needs continuous energy to keep spinning. But as author Chris Miller of Chip War puts it, sustaining this progress will demand even greater effort in the coming years.
📈 One of the Highlights: TSMC
Back in April 2024, TSMC and the U.S. Department of Commerce inked a deal under the CHIPS Act to the tune of $6.6 billion in funding. The goal? Support TSMC’s massive $65 billion investment in three state-of-the-art semiconductor fabs in Phoenix, Arizona. These facilities are set to produce some of the most advanced chips on the planet.
Even with all that cash flowing, TSMC isn’t cruising along without a hitch. Higher operational costs in the U.S. (compared to Taiwan) and a lack of skilled workers are putting pressure on the bottom line. TSMC has already revised its profitability targets, expecting gross margins to shrink by up to 3 percentage points annually for the next five years. To stay competitive, the company is leaning into AI-enhanced manufacturing and hinting it might need even more U.S. government help.
In Q4 2024, TSMC reported:
Net revenue: $26.88 billion
Net income: $11.59 billion
R&D spend: $1.77 billion (because innovation never sleeps)
The big question looms: Will TSMC fast-track its cutting-edge tech roadmap in the U.S.? If so, the global chip game could be about to shift in a major way. Stay tuned. 💾✨
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