With Donald Trump poised to return to the presidency, Taiwan’s semiconductor industry braces for potential disruptions to U.S. policy. The fate of President Joe Biden’s flagship initiative, the CHIPS and Science Act, now hangs in the balance.
The CHIPS and Science Act, signed into law in 2022, allocates $280 billion to bolster domestic semiconductor production and research in the U.S. This includes $39 billion in subsidies, loans, and tax credits for both American and foreign chip manufacturers.
The act garnered bipartisan support, promising jobs and technological advancement across various states. However, Trump’s return to the White House casts doubt on this initiative’s continuity, with Biden’s administration scrambling to finalize negotiations before January 20.
During a recent appearance on the Joe Rogan Experience podcast, Trump criticized the CHIPS Act, saying, “We put up billions of dollars for rich companies.” He has also accused Taiwan, home to the leading semiconductor producer TSMC, of “stealing” the U.S. chip industry.
Trump’s skepticism threatens to disrupt the distribution of funds, potentially through cost-cutting measures spearheaded by his proposed Department of Government Efficiency, led by Elon Musk and Vivek Ramaswamy.
Key Players and Investments
So far, 24 recipients have benefited from the CHIPS Act, the majority being U.S. companies like Intel, which recently secured $7.9 billion in direct funding. East Asian firms like TSMC and GlobalWafers from Taiwan, and Samsung and SK Hynix from South Korea, have also signed agreements. TSMC has committed to building four facilities in Arizona, receiving $6.6 billion in grants and $5 billion in loans. GlobalWafers will receive $406 million for new plants in Missouri and Texas.
However, with Trump’s incoming administration, the path forward is unclear. Analysts suggest Trump might delay or renegotiate the terms of these agreements, similar to his overhaul of NAFTA into the USMCA in 2018. This approach would allow him to rebrand the legislation to fit his agenda.
Dan Hutcheson, vice chair of Tech Insights, noted, “Trump likes to put his brand on everything, and we could see this happen with the CHIPS Act.”
Uncertainty for Asian Companies
TSMC has made the most visible strides in aligning with the CHIPS Act. However, South Korean firms have been more hesitant. Samsung signed a nonbinding deal to invest $45 billion in Texas in exchange for $6.4 billion in grants, but progress has stalled. Similarly, SK Hynix’s proposed $3.87 billion facility in Indiana remains in limbo.
Chim Lee, a senior analyst at the Economist Intelligence Unit, highlighted the risks of renegotiation. “The allocation of funds has already taken more than two years. Businesses dislike uncertainty and prolonged negotiations.”
In response to these delays and uncertainties, South Korea, Taiwan, and Japan have introduced their own subsidy programs to encourage local investment. Taiwan and South Korea have implemented CHIPS-like legislation, while Japan approved $3.9 billion for Rapidus, a domestic chipmaker, with plans to invest $65 billion in total.
Geopolitical Challenges
Geopolitical dynamics further complicate matters. Taiwan’s President William Lai Ching-te faces challenges from an opposition-led legislature, limiting his policy flexibility. South Korea is in political turmoil as the Constitutional Court deliberates the fate of President Yoon Suk-yeol. In Japan, Prime Minister Shigeru Ishiba leads a minority government, with another election looming.
William Reinsch, a senior adviser at the Center for Strategic and International Studies, remarked, “Leaders in Korea, Taiwan, and Japan are looking beyond the CHIPS Act. They are considering broader strategies for maintaining strong relations with the U.S., increasing defense spending, and aligning with U.S. policies on China.”
Summary
As Trump prepares to take office, the future of the CHIPS Act remains uncertain. Taiwan’s TSMC and other Asian semiconductor giants may face tough choices about where to invest. The coming months will be critical in determining how U.S.-Asia semiconductor relations evolve in this new political landscape.
