US President Donald Trump has announced plans to abolish the CHIPS Act, which allocates $52.7 billion in subsidies for semiconductor manufacturing. He intends to use the funds to reduce the national debt, a move that could have significant implications for the tech industry and economic policy.

“Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars and it doesn’t mean a thing. They take our money, and they don’t spend it,” Trump told Congress. “You should get rid of the CHIPS Act, and whatever is left over, Mr. Speaker, you should use it to reduce debt,” he added.

What is the CHIPS and Science Act?

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act is a US federal law signed by former US President Joe Biden in August 2022 to boost the domestic semiconductor industry. The Act provided subsidies of $39 billion for manufacturing semiconductor components in the US and $75 billion in government loan authority. It aims to reduce reliance on foreign semiconductor production, especially from countries such as Taiwan and China.

The Act was introduced at a time when the domestic production capabilities of the US stood at 12 per cent, a fall from 40 per cent in 1990, while Taiwan produced 60 per cent of the total semiconductors and more than 90 per cent of advanced chips, according to a report by Council on Foreign Relations.

Trump’s recent criticism of the CHIPS and Science Act is one of the strongest yet. “We don’t have to give them money,” Trump said.

Under the Biden administration, then Commerce Secretary Gina Raimondo convinced all five leading-edge global semiconductor firms to locate factories in the United States due to government grants provided to deal with national security concerns from imported chips.

Recent Grants

During the final weeks of the Biden administration, the Commerce Department finalised over $33 billion in grants to companies, including $4.745 billion to South Korea’s Samsung Electronics, $7.86 billion for Intel, $6.6 billion for Taiwan Semiconductor Manufacturing Co (TSMC), and $6.1 billion for Micron, newswire Reuters reported.

However, officials have raised concerns over the validity of these grants due to Trump’s statement.

New York Governor Kathy Hochul told Reuters that the law “is the reason Micron is bringing $100 billion and 50,000 jobs to Central New York. Trump just said he wants to get rid of it”.

Meanwhile, TSMC announced that it plans to invest $100 billion in the United States, including building five additional chip facilities. However, the government will not give TSMS any subsidies despite the company being eligible for a 25 per cent manufacturing investment tax credit.

This week, Trump fired nearly one-third of the staff in the US Commerce Department office, overseeing $39 billion in manufacturing subsidies for chipmakers, the report said.