Trump comments have semiconductor chip industry anxious
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Since the CHIPS and Science Act became law in 2022, the federal government has pledged hundreds of millions of dollars for emerging-technology research and production in Indiana that is meant to boost national security and broaden U.S. innovation.
But comments by President-elect Donald Trump and U.S. House Speaker Mike Johnson, R-La., just before the Nov. 5 election have raised questions about whether the new Republican president and GOP-majority Congress are fully committed to the act and whether changes could be coming.
“That chip deal is so bad,” Trump said on the “The Joe Rogan Experience” podcast last month.
Experts and observers say Republican leaders are unlikely to roll back the law and the money that’s already been allocated. But U.S. strategy to encourage domestic manufacturing of semiconductors going forward might be as much about higher tariffs as about spending money, they say.
“I think [President-elect Trump] has emphasized that this is going to be an administration of common sense,” said U.S. Sen. Todd Young, a Republican from Indiana and an author of the CHIPS Act. “And this is an area where common sense will be something that’s much needed.”
Young was one of the earliest advocates of additional federal spending aimed at reducing U.S. dependence on technology from China and other foreign countries and increasing research, development and manufacturing of semiconductors and other key technology components domestically.
The resulting law—the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act—allocated $53 billion in federal incentives for U.S.-based semiconductor manufacturing, and research and development. That includes $39 billion for the CHIPS for America Fund—administered by the U.S. Department of Commerce—to build new and expand existing semiconductor facilities. The law also makes semiconductor companies eligible for a 25% tax credit.
U.S. and foreign companies with facilities in the United States are eligible for the federal incentives.
The CHIPS Act has meant big investments in Indiana.
South Korean chip manufacturer SK Hynix Inc. is set to receive up to $450 million of federal CHIPS Act support to build its $3.87 billion semiconductor packaging facility at the Purdue Research Park in West Lafayette.
And two federal tech alliances overlapping in the state—the Silicon Crossroads Microelectronics Commons Hub and Heartland BioWorks Hub—have seen major funding. Silicon Crossroads was one of eight designees and saw $33 million in initial funding, while Heartland BioWorks was one of 12 and received $51 million.
Trump has complained that the law “put up billions of dollars for rich companies.” And just before the election, Speaker Johnson said Republicans “probably will” try to repeal legislation that spurred U.S. production of semiconductor chips—a statement he quickly walked back by saying he would like to instead “streamline” it.
Since then, observers have been trying to determine what that could mean for the law, especially with Republicans set to take control of the Senate in January.
Young did not answer IBJ’s questions on election night about whether the CHIPS Act will survive, but his office sent a statement.
“If there are any regulations that can be streamlined to create even more jobs from our growing semiconductor industry in Indiana and across the country, count me in,” the statement said. “But I’m confident the CHIPS Act is here to stay.”
U.S. Senate Majority Leader Chuck Schumer, D-N.Y., who was a lead sponsor of the legislation and worked on the final language with Young, is also confident.
“The CHIPS Act has always been bipartisan, so I believe it will certainly survive,” Schumer told reporters at an event in New York, according to several publications that were there.
The bill passed on a bipartisan vote in the Senate, including a yes from Senate Minority Leader Mitch McConnell, and with 24 Republicans joining the Democratic majority in the House.
No comment
Several Indiana stakeholders were unwilling to speak about the CHIPS Act’s future based on hypotheticals. The Indiana Chamber, which supported the bill’s passage, and Purdue University, a major stakeholder and partner to SK Hynix’s operation, declined to comment for that reason.
The Naval Surface Warfare Center Crane Division, which is involved in CHIPS Act activities, referred IBJ’s request for comment to the Department of Defense. Several semiconductor companies did not respond to requests for comment.
The Indiana Economic Development Corp. referred IBJ’s requests to the next gubernatorial administration. Gov.-elect Mike Braun’s transition team did not comment on the CHIPS Act and directed IBJ to his Nov. 6 transition press conference, which did not mention the CHIPS Act or semiconductors.
Members of Indiana’s newly elected congressional cohort did not respond to requests for comment on questions about CHIPS.
But other observers say Trump and the GOP Congress are unlikely to roll back CHIPS investments.
Citing the activity that the CHIPS Act has already generated, Roger Lee, director of research at Columbus, Indiana-based investment advisory firm Kirr Marbach & Co., said the spending is “in motion for Trump, like it or not. He’d be crazy to kill things in motion.”
Lee said the CHIPS Act and the domestic manufacturing activity it’s spurring also fit Trump’s “America first” outlook, especially when it comes to economic competition from China.
Still, the microelectronics industry is on high alert for any policy change, good or bad, said Bob Patti, founder and leader of Chicago-based Nhanced Semiconductors. The company is building an fabrication facility in the WestGate@Crane Technology Park in southern Indiana.
And while he’d be surprised to see a course change for the CHIPS Act, Patti said, companies like his are waiting to find out whether they need to amend their long-term planning.
A typical voter might be able to dismiss a campaign promise, he said, but businesses—especially in microelectronics—must consider those hypotheticals when planning years ahead.
Different approach
Observers say they expect Trump to focus on tariffs to encourage domestic production of microelectronics and other high-tech products and to discourage imports.
On the Rogan podcast before the election, Trump said “all you had to do is charge them tariffs,” in talking about how to address foreign dominance in microelectronics.
Tariffs are essentially a form of tax on imports that the domestic business buying the foreign goods must pay. Many experts agree that the additional cost gets passed on to consumers.
Trump’s promise to raise tariffs on foreign goods is making companies anxious, Patti said. The microelectronics industry is so widespread that it would be unusual for all components to be assembled in one country. A blanket tariff policy without cutouts, he said, would be “a shock to the system.”
Businesses “want the predictability of ‘the way things are,’ because their business models are based on the way things are,” he said. “When they are unsure of the impact of something, the inclination is just to back off and slow things down to see how the policy change is going to affect their market segment.”
If the CHIPS Act is curtailed or changed, Patti said, the industry will likely delay several in-progress projects. At worst, he said, he’d expect several companies to desert their plans.
“It may, in a lot of ways, undo the onshoring effort that has been underway,” Patti said.
Indiana’s two CHIPS-Act-funded hubs would likely lose steam, as well. A tech hub is a collection of members in the private sector, academia and government who are collaborating to grow innovation and domestic production in microelectronics and the life sciences. The state and hub organizers are seeking to grow on-the-ground investments around current and future members.
Stripping the CHIPS Act would kill Indiana’s federal tech hubs, Patti said, since they are not sustainable yet. It would be difficult to persuade companies to invest domestically, he said, since the industry is so capital-intensive and seeks to offset costs through incentives.
The Bloomington-based Applied Research Institute, which works with the IEDC to guide the state’s economic direction and leads the hubs, did not comment directly on the consequences if Trump rolls back the CHIPS program.
“ARI looks forward to working with the next administration and Congress to ensure these programs achieve their strategic objectives of advancing national security, creating high-paying jobs here in the U.S., and maximizing taxpayers’ return on these federal investments in emerging technologies,” said Andrew Kossack, ARI’s executive vice president for partnerships and its general counsel, in a statement.
Indiana leans in
As the industry is in a growth spurt, the CHIPS Act has given the microelectronics industry an economic reason to consider expanding operations in the United States. And the funding boost through the act has somewhat caught the United States up to speed with other countries, Patti said, because other nations already have similar incentive mechanisms in place.
“This is for an awful lot of the marbles,” he said.
According to the Semiconductor Industry Association, as of August, the CHIPS Act had already spurred nearly $450 billion in private investments across 28 states. That investment encompasses 90 projects announced nationwide, creating a combined 58,000 jobs. Those projects include the construction of semiconductor manufacturing facilities, known as fabs, expansions of existing fabs, and adding facilities that supply materials and equipment for chip manufacturing.
Since 2022, Indiana has attracted at least eight semiconductor-related companies, including SK Hynix in West Lafayette and Everspin Technologies at WestGate@Crane Technology Park.
“The CHIPS and Science Act has elevated the importance of U.S.-based manufacturing, which is vital in producing secure technology for the nation,” Bryant Niehoff, CEO of the Uplands Science and Technology Foundation, said in a statement. “We will continue to advocate for growth at the technology park, our partners, and the regional defense community, in collaboration with Crane leadership, state officials, and the new administration.”
Microelectronics is predicted to be a trillion-dollar global industry by 2030, according to New York-based management consulting firm McKinsey & Co. Purdue and Ivy Tech Community College have launched programs and are building clean rooms to prepare students to enter the industry. The IEDC is attempting to close deals with semiconductor companies to establish operations in its massive Boone County tech park. The state, ARI and companies have put hundreds to thousands of hours into negotiating with companies and crafting applications for federal funding.
For now, though, Patti said it’s business as usual. He said tariff changes could go into effect as soon as January, and the country will likely learn about the same time whether rescinding the CHIPS Act will be a presidential priority.
“It’s made me nervous,” he said. “I don’t know any other way to describe it.”
IBJ’s Susan Orr contributed to this story.