Finally, the most contentious, ruthless, and discordant U.S. federal election has come to an end, with Trump announcing his victory in the 2024 U.S. presidential election. So, what impact will Trump's win have on the semiconductor and even the broader technology industry?
The semiconductor industry is not only an integral part of the market but also of the global economy. Coupled with the continuous upgrading of artificial intelligence (AI) in almost all fields, semiconductor policies will carry geopolitical significance. The stances of Trump and Harris on the U.S. Chips Act have drawn widespread attention within the industry.
The Chips Act Originated from Trump's China-U.S. Trade War
In 2022, the U.S. government passed the $53-billion Chips Act to increase support for the semiconductor industry. Since then, the U.S. government has been awarding various incentives to companies targeting specific links in the supply chain, aiming to shift manufacturing back to the domestic front and protect the United States from geopolitical disruptions. Market analysis indicates that the proposal of the Chips Act was closely related to the China-U.S. trade war. The Trump administration laid the foundation for the enactment of the Chips Act, which was later passed during the Biden administration. Analysts from Moor Insights & Strategy believe that Trump's constant criticism of TSMC, accusing it of stealing business from the U.S. semiconductor industry, was probably aimed at urging the company to increase its investment in the United States and might even promote the Chips Act 2.0.
It is widely believed that, compared to across-the-board tariff impositions, incentive measures like the Chips Act are more beneficial to the U.S. chip manufacturing industry. Tariffs alone cannot stimulate domestic production in the United States; instead, they will increase the burden on consumers and exacerbate trade imbalances. For example, imposing tariffs on all chips manufactured in Taiwan, China, would drive up the prices of almost all U.S. electronic products, many of which have already been subject to tariffs.
If the next U.S. government expands the scope of tariffs, the ultimate costs for U.S. consumers and businesses will only increase. With the expansion of chip production scale in mainland China, imposing tariffs on chips from Taiwan, China, will make the prices of U.S. products significantly higher than those of products from other regions.
The Semiconductor Industry Association of the United States (SIA) points out that the total amount of subsidies, loans, and tax incentives under the Chips Act exceeds $300 billion, significantly stimulating private investment in U.S. chip manufacturing. The SIA believes that these measures are crucial for strengthening the U.S. chip industry.
Drastically Different Attitudes towards the Chips Act
If the Chips Act is successful, by 2032, approximately 28% of the global supply of advanced chips will come from the U.S. mainland, while currently this proportion is zero. So far, the U.S. Chips Program Office (CPO) has announced grants of $337.266 billion and loans of up to $288 billion to 20 companies.
The Harris campaign team, unsurprisingly, has been promoting the practice of the Chips Act in providing federal grants, subsidies, and loans to eligible enterprises such as Intel, TSMC, Samsung, and Micron.
However, there are preliminary indications that Trump may not be so enthusiastic about the Chips Act after taking office. First, Trump recently described the act as "terrible", believing that the agreement wasted billions of dollars in an attempt to attract foreign companies to establish chip companies in the U.S. Trump advocates attracting investment by imposing tariffs, believing that this way, quality companies can be attracted without spending any money.
Furthermore, Mike Johnson, the Speaker of the U.S. House of Representatives, was recently recorded as saying that if the Republicans gain unrestricted control of Congress and Trump wins the presidency, "we are likely to" attempt to repeal the Chips Act. Of course, Johnson quickly retracted these remarks, blaming his answer on mishearing the question and emphasizing that the Republicans support chip manufacturing but not the Green New Deal. He believes that the "simplification and improvement" of the Chips Act is necessary. However, this incident does indeed raise a warning about the long-term viability of this policy measure.
In addition to his stance on the Chips Act, Trump's remarks related to "Taiwan, China, stealing the U.S. chip business and implying that Taiwan, China, needs to pay for U.S. protection" have also been highly controversial within the industry. He has indicated that upon his return to the White House, he will impose tariffs on chips from Taiwan, China, despite the fact that over 90% of the world's advanced chips are supplied by TSMC.
Apart from his stance on the Chips Act, Trump's remarks related to "Taiwan, China, having snatched the U.S. chip business and implying that Taiwan, China, needs to pay for U.S. protection" have also been highly controversial in the industry. He indicated that upon his return to the White House, he would impose tariffs on chips from Taiwan, China, despite the fact that over 90% of the world's advanced chips are supplied by TSMC. Trump said, "We have invested billions of dollars to let wealthy companies come in, borrow money, and build chip companies here." However, Trump's view is somewhat different from that of his vice-presidential running mate, JD Vance. The latter believes that the semiconductor industry in Taiwan, China, is of vital importance to U.S. national interests. From an international relations perspective, TSMC's investment in advanced manufacturing facilities in the U.S. meets the requirements of the U.S. Moreover, TSMC's willingness to invest in the U.S. also implies higher costs, such as increased labor costs, and this additional financial burden can be interpreted as a "protection fee".
The Future Direction of the Chips Act Remains a Mystery
Harris, while supporting the Chips Act and acknowledging its value in promoting domestic production and job creation in the U.S., has not yet clearly stated her stance on tariffs or export restrictions that affect chips and electronic products. Although Trump and Harris hold opposite views on the Chips Act, the potential impact of their future chip policies remains uncertain.
The fact that the Chips Act supports the flow of over $500 billion in subsidies to semiconductor-related businesses has become widely known and seems to be reflected in market prices. But this does not necessarily mean that the deal is over, as implementation takes time. The U.S. Department of Commerce had to assemble a team and a logistics department to manage this project. It was not until December 2023 that the U.S. Department of Commerce announced the first grant.
What's important here is that even if policy changes are known, it is unknown where and when the funds will be deployed. For Joe Stockunas, the President of the SEMI Americas Chapter, the most concerning thing is that, as of now, only one company - Polar Semiconductor (with a relatively small financing amount of $1.23 billion) has signed the financing constraint contract stipulated by the Chips Act. Nearly twenty other companies have announced contract awards and are waiting to sign the contracts to lock in the funds. Stockunas said, "I'm actually having a hard time accepting this now because we did see good momentum this year." Delays are his biggest concern regardless of which administration succeeds the Biden administration.
In an industry plagued by boom and bust cycles, delays can cause derailment. Pat Gelsinger, the CEO of Intel, said last week that his company has not received any funds to assist in the construction of new factories in Arizona and Ohio, and he criticized the speed at which the funds are made available. Nevertheless, he still believes that regardless of who wins the U.S. presidential election, this initiative will continue. "The Chips Act is a bipartisan bill that has received strong support from both parties." Gelsinger said.
Expanding to the technology field, executives say that Trump's victory in the U.S. presidential election will have a far greater impact on the prospects of mainland Chinese technology companies than Harris's victory. His unpredictable style may either bring relief to the technology industry that has been hit by sanctions or increase restrictions.
During his tenure as president from 2017 to 2021, Trump banned the export of high-tech products to mainland China on the grounds of unfair trade practices and national security, thereby triggering the China-U.S. trade war. However, mainland Chinese technology executives say that his belligerent attitude combined with his sudden imposition of wide-ranging tariffs may make U.S. allies uneasy and destroy any coordinated efforts.
As the instigator of a comprehensive escalation in curbing mainland Chinese technology, if Trump takes office again, the Chinese semiconductor industry may face further suppression.
The fact that the Chips Act supports the flow of over $500 billion in subsidies to semiconductor-related businesses has become widely known and seems to be reflected in market prices. But this does not necessarily mean that the deal is over, as implementation takes time. The U.S. Department of Commerce had to assemble a team and a logistics department to manage this project. It was not until December 2023 that the U.S. Department of Commerce announced the first grant.
What's important here is that even if policy changes are known, it is unknown where and when the funds will be deployed. For Joe Stockunas, the President of the SEMI Americas Chapter, the most concerning thing is that, as of now, only one company - Polar Semiconductor (with a relatively small financing amount of $1.23 billion) has signed the financing constraint contract stipulated by the Chips Act. Nearly twenty other companies have announced contract awards and are waiting to sign the contracts to lock in the funds. Stockunas said, "I'm actually having a hard time accepting this now because we did see good momentum this year." Delays are his biggest concern regardless of which administration succeeds the Biden administration.
In an industry plagued by boom and bust cycles, delays can cause derailment. Pat Gelsinger, the CEO of Intel, said last week that his company has not received any funds to assist in the construction of new factories in Arizona and Ohio, and he criticized the speed at which the funds are made available. Nevertheless, he still believes that regardless of who wins the U.S. presidential election, this initiative will continue. "The Chips Act is a bipartisan bill that has received strong support from both parties." Gelsinger said.
Expanding to the technology field, executives say that Trump's victory in the U.S. presidential election will have a far greater impact on the prospects of mainland Chinese technology companies than Harris's victory. His unpredictable style may either bring relief to the technology industry that has been hit by sanctions or increase restrictions.
During his tenure as president from 2017 to 2021, Trump banned the export of high-tech products to mainland China on the grounds of unfair trade practices and national security, thereby triggering the China-U.S. trade war. However, mainland Chinese technology executives say that his belligerent attitude combined with his sudden imposition of wide-ranging tariffs may make U.S. allies uneasy and destroy any coordinated efforts.
As the instigator of a comprehensive escalation in curbing mainland Chinese technology, if Trump takes office again, the Chinese semiconductor industry may face further suppression.
Following: https://www.sic-chip.com/info-detail/trumps-announcement-of-election-victory-dramatic-increase-in-uncertainties-for-the-semiconductor-industry