Trump calls CHIPS Act ‘horrible,’ wants to defund it

In his address to Congress last night, President Donald J. Trump called the CHIPS Act “horrible,” and said whatever money hasn’t been spent should now be used to reduce the national debt.

The CHIPS Act, enacted into law in 2022 under then-President Joseph R. Biden Jr., is aimed at increasing semiconductor manufacturing and development in the US.

“Your CHIPS Act is a horrible, horrible thing,” Trump told Congress during his address. “We give hundreds of billions of dollars, and it doesn’t mean a thing. They take our money and they don’t spend it. All that meant to them — we giving them no money — all that was important to them was that they didn’t want to pay the tariffs, so they came and are building, and many other companies are coming.”

Trump said tariffs are a more effective method of convincing semiconductor manufacturers and developers to relocate or build new facilities in the US. He has announced the imposition of tariffs against Canada, Mexico and most importantly for the tech industry, against China.

“We don’t have to give them money; we just want to protect our businesses and our people, and they will come because they won’t have to pay tariffs if they build in America,” Trump said. “You should get rid of the CHIP Act [cq] and whatever’s left over, Mr. Speaker, you should use it to reduce debt. Or any other reason you want to.”

Late last month, reports emerged that the National Institute of Standards and Technology (NIST) planned to cut 497 jobs as part of Trump’s federal government downsizing efforts. NIST, a non-regulatory agency within the US Department of Commerce (DoC), helps drive innovation and industrial competitiveness and oversees the CHIPS for America program. The personnel cuts were widely criticized as damaging to the rollout of the CHIPS Act.

Robert Maire, president of consulting firm Semiconductor Advisors, wrote in a blog post that the plan to cut NIST staff isn’t “bluff or negotiation tactic.” Instead, the layoffs signal a complete shift in direction under Trump, he said.

“Trump made it clear over the last few days that he will institute 25% tariffs on imported semiconductor devices, so [it’s] obvious that strategy is shifting from incentivizing US chip production to penalizing imports instead,” Maire said. “This also lowers the likelihood of TSMC taking over Intel manufacturing, as giving top US chip production to Taiwan contradicts the new strategy.”

The goal of the CHIPS Act is to reduce reliance on foreign semiconductor supply chains, improve national security, and support innovation in critical technologies such as electronics, defense, and healthcare. It also aims to create jobs and strengthen the U.S. economy.

The Department of Commerce has been divvying up $52 billion in the hopes of spurring on-shore chip manufacturing. While about $32 billion of CHIPS Act money has been allocated, the funds have not yet been technically dispersed.

Among recipients of CHIPS Act funding are Intel, Samsung, Micron, TSMC, and Texas Instruments; all of those companies have unveiled plans for a number of new US chip fabrication plants. In return, those chip designers and makers have pledged about $300 billion in current and future projects in the US, according to the White House.

“CHIPS Act and tax incentives are important in [semiconductor] manufacturers’ decision to build fabs in the US versus elsewhere,” said David Tsui, technology managing director for S&P Global Ratings. “There are milestones that these semi manufacturers need to hit before they can receive grants distribution from the CHIPS office. The grants are important because the cost to built a fab and manufacture wafers in the US is much more expensive than in Asia.

“Details on how tariffs can attract semi manufacturers to build fabs in the US are still unclear,” Tsui said. “Currently tariffs are on imports. However, chips and other tech components are assembled into final products before imported into the U.S.“

TSMC, the world’s largest contract chipmaker and a key supplier to US manufacturers, met Trump at the White House on Monday and announced a $100 billion investment to build five new chip facilities in the US. TSMC Chairman and CEO Dr. C.C. Wei praised Trump after the meeting.

“Back in 2020, thanks to President Trump’s vision and support, we embarked on our journey of establishing advanced chip manufacturing in the United States. This vision is now a reality,” Wei said in a statement.

Following the White House meeting, Trump said: “We must be able to build the chips and semiconductors that we need right here. It’s a matter of national security for us.”

TSMC’s $100 billion investment aims to reduce US reliance on Asian-made semiconductors. This follows last April’s announced plans to expand its US investment by $25 billion and add a third Arizona factory by 2030. While no timeline was provided, the effort would create 40,000 construction jobs in four years, the company said. Delays at its first Arizona plant pushed chip production to 2024 at higher costs than in Taiwan.

In addition to its latest manufacturing site in Phoenix, TSMC operates a fabrication plan in Camas, WA, and design service centers in Austin and San Jose. The company declined to comment on Trump’s latest remarks. Intel and Micron did not respond to a request for comment either.

“Higher costs are definitely a concern for TSMC,” said Andrew Tsai, chairman of Taiwan consulting firm Capital Investment Management Corp.

Jack Gold, principal analyst with tech industry research firm J. Gold Associates, called Trump’s comments “a wrong view of the CHIPS Act.”

“I think to repeal the CHIPS Act, or even let it just fade away due to restricting the NIST employees as seems to be happening now, is a big mistake,” Gold said. “Other countries, especially China, incentivize their manufacturers and we see how fast their tech is moving. Do we really want to penalize our own industries at a time of massive competition?”

Tariffs, Gold said, don’t work long-term because they become permanent without boosting manufacturing. Incentives are more effective for encouraging companies to invest in US capacity, he said.

“Without this approach, we wouldn’t have had the space program, which led to advances like chips, healthcare, and satellites,” he said. “If allocated funds aren’t fully disbursed, many projects may be canceled, which could be disastrous. We’re already seeing issues due to uncertainty around NIST disbursements.”