When President Trump spoke to Congress last week, he unscripted to attack sensitive topics. This is a bipartisan law aimed at ensuring the US is not dependent on Asia for semiconductors.
Republican lawmakers have received guarantees over the past few months in support of the Trump administration's programmes created by Congress. But midway through Trump's remarks, he called the law “terrifying, terrifying.”
“We should remove the chip law,” he told Speaker Mike Johnson as Congressman Mike Johnson applauded.
The Chip Program has drafted a bill that will continue to rebuild the US semiconductor industry by lawmakers on both sides of the aisle working with private companies to continue with $50 billion. After President Joseph R. Biden signed the law in 2022, businesses found sites in Arizona, New York and Ohio and built new factories. The Commerce Department has examined these plans and began to oust billions of grants.
Now, Trump is threatening to overturn his long-standing job. Chip Company executives are worried that funds will be curbed, and eight people familiar with the request said they are calling lawyers to ask about the wavy rooms where the administration will have to close their signing agreement.
After the speech, Sen. Todd Young, an Indiana Republican who defended Chips, said he reached out to the White House to clarify Trump's attacks because of “tensions” with the administration's previous support.
“If you need to transform into another model over a period of time, I certainly support that,” Young said last week. “But let's be clear. Chips and scientific methods have at least been implemented in the chip part, which is one of the greatest successes of our time.”
The US was able to develop the semiconductor industry, design the first microchips and the processes that created them, and become the early tech leader. However, in the 1980s, companies began outsource most of their production to Asia.
US lawmakers have begun pushing for a restructuring of domestic chip production after the pandemic created a global chip shortage, forcing some U.S. automotive factories to shutter and enforce the Chips Act.
But the Trump administration has already taken steps to entrust the program.
In late February, Michael Grimes, a senior commerce official and former investment banker for Morgan Stanley, conducted a brief interview with employees at the Chips Program Office, which oversees the grants.
In the interaction described as “despicable,” Grimes asked employees to justify their intelligence by providing test results for SAT or IQ tests, four well-versed in the assessment said. Some were asked to do mathematical problems, such as calculating the value of the fourth power or long division.
Last week, the Commerce Department fired 40 of Chips Office employees, almost a third of the entire team, these people said.
The administration is also beginning to discuss changes to chip-related subsidies, according to three people familiar with internal conversations. The Biden administration has hired union construction workers and given priority treatment to recipients who provided childcare to employees, people said guidelines could change.
Reviews and layoffs have been reported previously by Reuters and CNBC.
On Wednesday, the day after Trump's speech, the Semiconductor Industry Association organized a call with member companies, three well-versed in the discussion said. On the phone, people choked up Trump's frustration over the laws against personal animus with Biden.
People said Trump's criticism could create challenges by attracting public attention to their projects. However, many also expressed confidence that they could not change their legal agreement with the Commerce Department.
The Semiconductor Industry Association declined to comment.
So far, the Department of Commerce has signed an agreement to grant more than $36 billion in federal grants under the CHIPS Act. It has pledged to invest hundreds of millions of dollars in chip manufacturing facilities in the US, including Taiwanese semiconductor manufacturers known as Samsung, Intel, Micron and TSMC.
Trump suggests replacing these incentives with tariffs that increase the cost of manufacturing chips overseas. On Tuesday, he said the tariff threat forced TSMC, the world's largest manufacturer of advanced semiconductors, to increase US investment by $100 billion and increase the number of plants it is building in Arizona by six times.
“We don't need to give them money,” Trump said. “We just want to protect our businesses and our people. If they were built in America, they'll come because they don't have to pay tariffs.”
It is unclear how much tariffs will be imposed under the TSMC plan. The company had already acquired the land and had drafted plans to expand its Arizona footprint. There were customers supporting one additional plant, said three people familiar with the chips method. TSMC is investing earlier than previously planned, as customers like Apple and Nvidia have also made the promise to buy more US chips, people added.
TSMC and Intel declined to comment. Mikron and Samsung did not respond to requests for comment.
Lawyers and industry executives say tariffs on the chips themselves are not that effective. Because the US does not import chips directly. The chips are usually sent directly to an e-factory factory in Asia, where they are placed in laptops, mobile phones and home appliances before being imported into the US.
Some people in the chip industry are developing plans to convince Trump of the value of the law since the election, including an industry annual rally in San Jose, California in November. The first law was partially promoted by demands from officials during the first Trump administration when TSMC invested in the United States, starting efforts from Congress and securing funds for the company.
It quickly snowballed in broader efforts to fund the industry, as other companies and lawmakers wanted to participate.
“We need to make sure that our Washington colleagues remember to accept it and continue to invest in an incredible industry,” said Deirdre Hanford, chief executive of Natcast, a nonprofit created by Chips to oversee semiconductor technology development.
Due to the risk of losing funds, some industry executives complained that the government was too late to be able to provide subsidies in the first place. The law was introduced in August 2022, but the Biden administration spent several months examining each project carefully. Most of its biggest grants were finalised after the election.
“Is it perfect? At Washington Institute of Technology and Policy Conference last week, Sen. Mark Warner, a Virginia Democrat, said: “But without it, there wouldn't be another manufacturing facility built in the US.”
