President Donald Trump’s recent push to repeal the CHIPS and Science Act, signed into law in August 2022, has raised concerns about the future of U.S. semiconductor manufacturing. The act allocates $39 billion in subsidies and up to $75 billion in government-backed loans to strengthen domestic chip production. Proponents credit the measure with prompting high-profile investments in new or expanded fabrication plants, including a planned $100 billion Micron facility in upstate New York.
“This is a horrible, horrible thing; we give hundreds of billions of dollars, and it doesn’t mean a thing,” Trump said, arguing for tariffs as an alternative means to incentivize chipmakers. He urged Congress to repeal the CHIPS Act and redirect any unspent funds toward reducing the national debt.
However, a repeal could have wide-ranging ramifications for the semiconductor industry:
Reduced incentives for new projects
Without the CHIPS Act’s financial backing, major industry players might reconsider building or expanding domestic facilities. Companies often rely on subsidies and loans to offset the high costs of manufacturing advanced semiconductors.
Legal complications for existing contracts
Micron’s mega-fab in Central New York is one of several projects supported by what the company describes as a “legally binding, signed contract” tied to CHIPS Act funds. If lawmakers revoke the law, contract terms could come into question. Some analysts suggest federal agencies may need to honor agreements already in place, but the exact legal ramifications remain unclear.
Slowing domestic manufacturing goals
The CHIPS Act is designed to make the United States less reliant on foreign suppliers, especially for critical electronic components. A repeal could stall or derail the expansion in domestic chip production, potentially shifting future investments overseas to regions offering stronger incentives, such as Asia or Europe.
Workforce and R&D disruptions
Losing billions in subsidies would likely affect research collaborations between private companies and universities and training programs to create a robust pipeline of semiconductor engineers and technicians. Reduced funding may hinder the development of next-generation chip technologies.
Uncertain outlook for tariff-based strategies
President Trump suggested that easing or eliminating tariffs on chipmakers might be a simpler way to attract their investment. Industry observers, however, question whether this approach can match the considerable draw of direct financial incentives offered through the CHIPS Act.
While repealing the legislation might satisfy calls for cutting federal spending, it risks undercutting a core initiative to shore up a domestic technology sector that underpins everything from consumer electronics to national defense systems. With Congress divided on budget priorities, the fate of the CHIPS Act — and billions of dollars in pending or planned semiconductor investments — remains uncertain.
Potential contract renegotiations and overseas shifts
One possible outcome of a CHIPS Act repeal could be a wave of challenging contract renegotiations as semiconductor firms and government entities seek to compensate for withdrawn subsidies or loans. Analysts suggest chipmakers may redirect funds to international locations to secure more stable incentives or demand new terms from states and municipalities eager to retain high-tech investments. A broader climate of fiscal austerity and trade uncertainty could stall the expansion of existing facilities and dampen plans for new domestic chip manufacturing initiatives.
