Will the chip industry become more difficult if Trump is elected?

The US has used trade restrictions and sanctions to curb China's technological progress since President-elect Donald Trump took office. Now that Trump is back in the White House, the semiconductor war between China and the US is likely to escalate further.

“If Trump gets elected, he has said in his campaign rhetoric that he will double down on that and even increase tariffs and export controls,” Arthur Dong, a professor at Georgetown University’s McDonough School of Business, told Quartz before the election.

The Biden administration continues its efforts to slow China’s advanced chipmaking capabilities during Trump’s first presidency.

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

“He [Trump] will likely go further than the Biden administration in imposing across-the-board tariffs on a wider range of goods,” Dong said.

Chinese tech giant Huawei was added to the U.S. Entity List in 2019 during the first Trump administration after the U.S. government determined that Huawei had “engaged in activities contrary to the national security or foreign policy interests of the United States.” Other Chinese semiconductor companies were also added to the list to restrict U.S. companies from sending them equipment used in 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 technology companies.

Before the election, U.S. chip equipment makers were reportedly preparing for the Biden administration to tighten export controls by telling suppliers that they were concerned that using certain components supplied by China would jeopardize their supplier status. The companies 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 United States will continue to put pressure on its allies to take more restrictive measures,” ASML Chief Executive Christophe Fouquet said in October. “The question is, what is right for the Netherlands? What is right for Europe?”

During the recent presidential campaign, Trump said he would impose tariffs on chips from Taiwan, which could have a significant impact on the global chip manufacturing industry because most of the world's most advanced chips are made by Taiwan Semiconductor Manufacturing (TSM), a Taiwanese chipmaker that counts Nvidia and Apple as major customers.

In October, Trump accused Taiwan of stealing the U.S. chip industry during an appearance on the Joe Rogan Experience podcast — a point he also made in a July interview with Bloomberg Businessweek. Trump also said Taiwan “took our chip business away.”

"I mean, how stupid we were," Trump said. "They took away all our chip business. They're very rich."

Trump said that instead, Taiwan should pay the United States to protect it.

"I think we're no different than an insurance policy," Trump told Bloomberg. "Why? Why would we do that?"

Taiwan Semiconductor Manufacturing Co. and South Korea's Samsung face an uncertain future in the United States as the two Asian chip giants wait to see whether the next administration of President 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, which provides billions of dollars in support for bringing semiconductor manufacturing to the United States.

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

Trump described the CHIPS bill as "very bad" in an October interview with podcaster Joe Rogan and said he would use tariffs to push companies to make semiconductors in the U.S.

“We’ve put billions of dollars into having wealthy companies come in and borrow money and build chip companies here, but they’re not going to give us great companies anyway,” Trump said.

The subsidies and other incentives for TSMC and Samsung announced in April were preliminary and no final agreement has been reached, leaving room for the incoming Trump administration to revise the terms and potentially eliminate some of the benefits.

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

Rob Atkinson, president of the Information Technology & Innovation Foundation, a Washington think tank, said: "In my view, the Biden administration made a fundamental mistake by not releasing this money. Why would you give the next administration the option of not spending this money?"

It's already an uphill battle for TSMC and Samsung to build fabs in the United States due to labor shortages, rising costs and differences in work culture.

TSMC originally planned to have its first U.S. plant in Arizona fully operational in 2024, but postponed the target to 2025. The company also postponed the start-up date of its second wafer plant from the original 2026 to 2027 or 2028. Samsung also postponed its mass production plan for its Texas wafer plant from the second half of 2024 to sometime in 2026 due to insufficient production, according to media reports.

The chipmakers have previously said the CHIPS Act is critical to their U.S. expansion plans and that delays in funding allocation 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 of the projects, such as TSMC's plant in Arizona and Samsung's factory in Texas, are located in states with strong Republican support.

"It's not worth it for Trump from a political perspective, especially since the money has already been appropriated by Congress," Atkinson said.

But the Trump administration could try to limit or slow the distribution of grants "just to make a point, even though they can't legally move the money somewhere else," he added.

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