President Donald Trump plans to abolish the CHIPS Act, which provides $52.7 billion in semiconductor chip manufacturing and production subsidies and uses the proceeds to pay debt.
“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 told Congress. “You should get rid of the CHIPS Act and whatever is left over, Mr. Speaker, you should use it to reduce debt,” he added.
What is the CHIPS and Science Act?
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act is a US federal law signed by former US President Joe Biden in August 2022 to boost the domestic semiconductor industry. The Act provided subsidies of $39 billion for manufacturing semiconductor components in the US and $75 billion in government loan authority. It aims to reduce reliance on foreign semiconductor production, especially from countries such as Taiwan and China.
The Act was introduced at a time when the domestic production capabilities of the US stood at 12%, a fall from 40% in 1990, while Taiwan produced 60% of the total semiconductors and more than 90% of advanced chips, according to a report by Council on Foreign Relations.
Trump’s recent criticism of the CHIPS and Science Act is one of the strongest yet. “We don’t have to give them money,” Trump said.
Under the Biden administration, then Commerce Secretary Gina Raimondo convinced all five leading-edge global semiconductor firms to locate factories in the United States due to government grants provided to deal with national security concerns from imported chips.
Recent grants
The Commerce Department finalised over $33 billion in grants to companies, including $4.745 billion to South Korea’s Samsung Electronics, $7.86 billion for Intel, $6.6 billion for Taiwan Semiconductor Manufacturing Co, and $6.1 billion for Micron during the final weeks of the Biden administration, reported Reuters.
However, officials have raised concerns over the validity of these grants due to Trump’s statement.
New York Governor Kathy Hochul told Reuters that the law “is the reason Micron is bringing $100 billion and 50,000 jobs to Central New York. Trump just said he wants to get rid of it.”
Meanwhile, TSMS announced that Trump plans to invest $100 billion in the United States, which will include building five additional chip facilities. However, the government will not give any subsidies to TSMS despite the company being eligible for a 25% manufacturing investment tax credit.
This week, Trump fired nearly one-third of the staff in the US Commerce Department office, overseeing $39 billion in manufacturing subsidies for chipmakers, the report said.
