Trump’s election jeopardizes government subsidies under the “Chip Law”: chip makers may be left with nothing

The administration of current US President Joe Biden has accelerated negotiations with electronics manufacturers including Intel and Samsung as it seeks to cement one of its signature initiatives before President-elect Donald Trump takes over the White House. Bloomberg.

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The Commerce Department has committed more than 90% of the $39 billion in the 2022 CHIP Act to revive the U.S. semiconductor industry, but only one agreement has been reached. The coming two months will be important for more than twenty companies that are still in the process of receiving subsidies. Some of them, including TSMC and GlobalFoundries, have already completed negotiations and are awaiting the announcement of a final decision. Others, such as Intel, Samsung and Micron, are still working out important details of their contracts.

The authorities aim to conclude as many agreements as possible by the end of 2024, which will allow funds to begin transferring to companies that have achieved the agreed results. The election of Trump was an additional incentive: the Biden administration wants to separate industrial policy from party politics, and manufacturers do not want to renegotiate conditions with the arrival of a new administration. The CHIP Act includes not only grants, but also multibillion-dollar loans and tax breaks. Democrats view it as one of their most important achievements, and the president-elect and his allies have begun criticizing the legislation in recent days. Trump called it “very bad” and said a more effective solution would be to regulate tariffs; Republican Rep. Mike Johnson has vowed to “simplify” it; he previously mentioned wanting to repeal the law altogether but has since abandoned that idea.

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At the same time, the Trump administration began negotiations with TSMC on the construction of factories in Arizona during his first presidential term; and U.S. semiconductor manufacturing has been cited by both parties as a national security priority, especially given Taiwan’s complex geopolitical environment. Republicans can remove social aspects from the “CHIP Law”: requirements for kindergartens, the procedure for interaction with trade unions and environmental protection. Companies, however, are more concerned that political games will further delay funding – money, according to their management, has not been coming in for too long. At the same time, some projects have already achieved the required indicators, which means that the first tranches can go immediately after contracts are concluded.

In the case of Intel, the outcome of the negotiations depends on the company’s prospects – today it is experiencing serious difficulties and may separate its production area. Micron, like several other players, is reluctant to join the National Semiconductor Technology Center (NSTC). Samsung scared the Biden administration with such a weak quarterly report that the company’s management had to apologize. Negotiations between the American authorities and the Korean company were interrupted for more than a month, but have now resumed.

Other unresolved issues include pay for plant construction and clarity on how close ties with China might be. The Biden administration’s goal is to establish obligations to pay as large a volume of funds as possible before the arrival of a new president. This will protect companies from most possible changes short of an act of Congress or violation of the terms of the agreement by the recipients of the money. The Trump administration’s Commerce Department could also try to terminate or renegotiate existing agreements, but his team has said it won’t do that. However, some of the final work, including the actual transfer of funds, will fall on the shoulders of Trump appointees.