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CHIPS Act expected to survive, change under Trump
Changes to the Biden administration's application guidelines for the CHIPS Act, some of which Republicans fought against, are likely.
The bipartisan CHIPS Act, passed during President Joe Biden's administration to bolster U.S. semiconductor manufacturing, will most likely remain intact under the Trump administration, with some changes to its guidelines, experts said.
President-elect Donald Trump has said he favors tariffs over subsidies and tax credits to convince companies to build manufacturing facilities in the United States. Nevertheless, proposing dramatic changes to the 2022 CHIPS and Science Act would likely get pushback from Republican lawmakers whose states would benefit from the law.
States earmarked to get factories supported by the act include Ohio, Texas and Arizona -- all states that voted for Trump. New York, a Democratic state that supported Trump's opponent in the presidential race, Vice President Kamala Harris, was recently added to the list.
Industry watchers believe it's more likely that Trump will put his stamp on the CHIPS Act by changing the Biden administration's application guidelines, some of which Republicans fought against. Those guidelines include requiring some recipients to provide child care; encouraging the use of union labor; and demonstrating climate and environmental responsibility, such as using renewable energy to operate facilities built under the act.
"The most likely changes would be to remove some of the -- let's call them 'progressive' parts of the guidelines," said Alan Sykes, a law professor at Stanford University. "If they were going to make some changes, that would be the low-hanging fruit."
Changing the guidelines would be "modifying it on the edges," said Jack Gold, principal analyst at J.Gold Associates. However, removing the union labor requirement would roll back the Biden administration's goal of guaranteeing union wages for construction workers.
"The money was set aside to create job opportunities and to create manufacturing capabilities for America," Gold said. "They wanted to take care of the workers."
CHIPS Act vs. tariffs
Chips are critical components in products used by industries ranging from defense and communications to computing and healthcare. The importance of semiconductors to U.S. security and the economy drove bipartisan support for the CHIPS Act.
The act's incentives work better than tariffs because the former provides the financial help necessary to build factories that take three to four years to develop and cost between $20 billion and $40 billion, Gold said in a research note. Also, a state-of-the-art factory today would require major upgrades every two to four years to continue taking advantage of the latest advancements in chip manufacturing.
Because building chip factories, or fabs, is a high-risk business, having the government as a partner is critical to making such projects financially feasible, Gold said. Tariffs wouldn't help with that dynamic. Instead, chipmakers would pass on the added cost to customers, raising the price of all products that use semiconductors.
The Biden administration is moving quickly to complete CHIPS Act agreements with chip manufacturers before Trump becomes president, Bloomberg reported on Friday. More than 20 companies are in various stages of the process of finalizing deals, including Intel, Taiwan Semiconductor Manufacturing Co. (TSMC) and GlobalFoundries.
Intel will receive the most financial help under the CHIPS Act, including an $8.5 billion grant and $11 billion in loans for several projects, such as two new fabs in Arizona and a semiconductor manufacturing hub in Ohio. Intel plans to invest $100 billion in chip facilities over the next five years.
"As the only American company that designs and manufactures leading-edge chips, Intel has a critically important role to play, and we look forward to working with the Trump administration on this shared priority," the company said in a statement.
GlobalFoundries expects to receive $1.5 billion for two projects, including a new semiconductor fab on its Malta, N.Y., campus, and TSMC wants $6.6 billion to support a $65 billion investment in building three fabs in Phoenix.
Antone Gonsalves is an editor at large for TechTarget Editorial, reporting on industry trends critical to enterprise tech buyers. He has worked in tech journalism for 25 years and is based in San Francisco. Have a news tip? Please drop him an email.
