If Trump Is Elected, It Will Be More Difficult For The Chip Industry？

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If Trump is elected, it will be more difficult for the chip industry?

Since President-elect Donald Trump took office, the United States has used trade restrictions and sanctions to contain China's technological advances. Now that Trump is back in the White House, the semiconductor war between China and the United States could escalate further.

Arthur Dong, a professor at Georgetown University's McDonough School of Business, said in a pre-election interview with Quartz: "If Trump takes office, as he has already said in his campaign rhetoric, he will redouble his efforts and even increase tariffs and export controls." "

During Trump's first presidency, the Biden administration continued its efforts to slow down China's advanced chip manufacturing capacity.

Earlier this year, the Biden administration was reportedly debating the use of an export control measure called the Foreign Direct Products Rule, which would affect companies in U.S. allies, including Japan's Tokyo Electron (TOELY). and Dutch chipmaker ASML, which states that any goods are not allowed to be exported to any country if they are made with a certain percentage of U.S.-intellectual property components. Later it was reported that some allies would be exempted if the rule was expanded.

"He [Trump] could go further than the Biden administration in imposing sweeping tariffs on a wider variety of goods," Dong said. "

Trump has imposed restrictions on the sale of chips to China

During the first Trump administration, Chinese tech giant Huawei was added to the U.S. Entity List in 2019 because the U.S. government determined that Huawei had "engaged in activities that violated U.S. national security or foreign policy interests." Other Chinese semiconductor companies are also on the list to restrict U.S. companies from sending them equipment for advanced chip manufacturing. Trump extended the ban on Huawei products until 2021, and the Biden administration has tightened trade restrictions on Huawei and other Chinese tech companies.

Ahead of the election, U.S. chip equipment makers reportedly prepared for the Biden administration's tightening of export controls, telling suppliers that they were concerned that using certain components supplied by China would jeopardize their supplier status. The companies have also reportedly told suppliers not to have Chinese investors or shareholders.

"If you look at the geopolitical landscape, I think it's clear that the U.S. will continue to put pressure on its allies to take more restrictive measures," Christophe Fouquet, ASML chief executive, said in October. "The question is, what is right for the Netherlands? What is true for Europe? "

Collect protection money from Taiwan

In the recent presidential campaign, Trump said that he would impose tariffs on chips from Taiwan, which could have a significant impact on global chip manufacturing, as most of the world's most advanced chips are made by China's Taiwan Semiconductor Manufacturing Corporation (TSM), which includes Nvidia and Apple as its main customers.

In October, Trump accused Taiwan of stealing the U.S. chip industry during a podcast episode on The Joe Rogun Experience - something he also mentioned in an interview with Bloomberg Businessweek in July. Trump also said Taiwan "took away our chip business." "I mean, how stupid we are," Trump said. "They took away all of our chip business. They are very rich. Instead, Trump said, the Taiwan region should pay the United States to protect it. Trump told Bloomberg: "I don't think we're any different from insurance policies. Why? Why do we do this? "

Cast a shadow on TSMC and Samsung

Taiwanese semiconductor manufacturing companies and South Korea's Samsung face an uncertain future in the United States, and the two Asian chip giants are waiting to see if the next administration led by Donald Trump will continue to support their massive expansion plans.

The president-elect criticized the bipartisan CHIPS Act, enacted by President Joe Biden in August 2022 to provide billions of dollars in support for bringing semiconductor manufacturing to the United States.

In April, the U.S. government announced $6.6 billion and $6.4 billion in grants to TSMC and Samsung, respectively, making them the biggest beneficiaries of the CHIPS Act, behind Intel, which received $8.5 billion in grants. As part of the incentive program, the two Asian companies also pledged government loans and investment tax credits.

In an interview with podcaster Joe Rogun in October, Trump described the CHIPS Act as "very bad" and said he would use the tariffs to push companies to produce semiconductors in the United States

"We've poured billions of dollars into getting rich companies to come in and borrow money and build chip companies here, but they're not going to give us good companies anyway," Trump said. "

The grants and other incentives for TSMC and Samsung, announced in April, are only preliminary, and a final deal has yet to be reached, leaving room for the incoming Trump administration to revise the terms and possibly eliminate some benefits.

So far, only one project has actually received funding from the CHIPS Act: Polar Semiconductors, a U.S. semiconductor manufacturer, has received $123 million. The Commerce Department's CHIPS for America office is working to speed up the distribution process, but due to the complexity of the deal, it is unlikely that all the terms will be finalized and most of the funds will be allocated before the end of Biden's term, a person familiar with the matter said.

Rob Atkinson, president of the Information Technology and Innovation Foundation, a Washington-based think tank, said: "In my view, the Biden administration made a fundamental mistake by not releasing this funding. Why would you want the next government to choose not to spend this money? "

With labor shortages, rising costs, and differences in work culture, TSMC and Samsung building a fab in the U.S. is already an uphill battle.

TSMC had planned for its first U.S. factory in Arizona to be fully operational in 2024, but postponed the goal to 2025. The company has also postponed the start date of a second fab from the original 2026 to 2027 or 2028. According to media reports, Samsung has also postponed the mass production plan of the Texas fab from the second half of 2024 to sometime in 2026 due to insufficient production.

The chipmakers have previously said that the CHIPS Act is critical to their U.S. expansion plans, and delays in the allocation of funds will affect the speed and scale of construction.

However, not everyone is convinced that Trump will actually try to repeal the CHIPS Act, especially since many projects, such as TSMC's factory in Arizona and Samsung's factory in Texas, are located in states that are heavily backed by the Republican Party. "From a political point of view, it's not worth it for Trump to do this, especially since the money has already been appropriated by Congress," Atkinson said. "

But the Trump administration may try to limit or slow the allocation of appropriations, "just to take a stand, even though they can't legally move the money elsewhere," he added.