Trump's Return Threatens Billions in US Chip Investment from Taiwan, Samsung

Semiconductor giants, including Taiwan Semiconductor Manufacturing Co TSM and Samsung Electronics SSNLF, have been at the forefront of a multi-billion-dollar investment wave in the United States.

The surge began after the Chips and Science Act was passed, which aimed to revive the U.S. semiconductor industry by offering historic subsidies. However, with the possible return of former President Donald Trump, this ambitious push to boost U.S. chip manufacturing may need to be revised.

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A report from the Financial Times highlights growing concerns that the future of the Chips Act is now in jeopardy.

In a recent interview, President-elect Trump criticized the Chips and Science Act. Since his campaign days, Trump has threatened to slap up to 60% tariffs on exports to China.

His stance threatens to undermine the bipartisan support the legislation received in 2022. The $39 billion subsidy package, designed to encourage companies to build factories in the U.S., now faces scrutiny.

With a leadership shift coming in January 2025, executives worry about the fate of ongoing investments and the possibility of projects being delayed or canceled. Industry leaders hope to finalize deals before Trump assumes office, as this would make it harder for him to dismantle the program once it is locked in.

The Chips Act’s subsidies are crucial for attracting foreign companies such as Taiwan Semiconductor and Samsung, who are investing billions in U.S. semiconductor plants. The legislation offers direct grants and tax incentives, a rarity in U.S. industrial policy.

Chris Miller, a professor at Tufts University, told the FT that it’s rare to find industrial policies offering billions of dollars in incentives to foreign firms.

This growth has paralleled a broader stock market boom, particularly in companies developing chips for artificial intelligence, such as Nvidia Corp NVDA and Arm Holdings ARM.

Rebuilding U.S. manufacturing, however, requires the involvement of key players like Taiwan Semiconductor and Samsung. Martin Chorzempa, the study’s author, warned of the risks of discontinuing the program, stating that without these incentives, attracting future investments to the U.S. would be a significant challenge.

According to FT, Taiwan Semiconductor and GlobalWafers Inc GFS, along with Samsung and SK Hynix, are slated to receive nearly $14 billion in grants, which will make up a significant portion of the subsidy package under the Chips Act.

These grants are vital in competing against China’s rising technological power. However, the U.S. Department of Commerce needs to approve these deals faster, causing frustration among company executives. Taiwan Semiconductor has already secured $6.6 billion in grants and up to $5 billion in U.S. government loans for its Arizona plant. However, the final green lights on other grants are still pending.

The chip stocks are also trading lower Tuesday in sympathy with Oracle Corp’s ORCL worse-than-expected second-quarter print. The company reported second-quarter revenue of $14.06 billion, up 9%, missing the Street consensus estimate of $14.11 billion. The adjusted EPS of $1.47 missed the Street consensus estimate of $1.48.

Price Actions: TSM stock is down 2.94% at $193.31 at last check on Tuesday. NVDA is down 1.51%, GFS is down 1.35%, INTC is down 2.82%, AMD is down 1.73%, AVGO is down 4.50%, MU is down 3.62%, QCOM is down 2.07%.

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