US President Donald Trump has urged Congress to repeal the $52.7 billion CHIPS and Science Act, a federal programme signed by then President Joe Biden in August 2022 that includes $39 billion in subsidies for semiconductor manufacturing and related components, along with $75 billion in government lending authority.

The subsidies were intended to strengthen America’s domestic chip industry through state funds and tax incentives.

"Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars and it doesn't mean a thing. They take our money and they don't spend it," Trump said in a speech to Congress on Tuesday, and suggested that whatever funding remains should be channeled into reducing national debt.

Although the president alone cannot terminate this law—Congress will have to vote to withdraw funding—his words still sent shockwaves through an industry already grappling with changing priorities and fierce global competition.

The unexpected criticism has cast uncertainty over semiconductor manufacturing plans across the country, just as companies like Intel, TSMC, and Micron are committing to multibillion-dollar facilities in Arizona, Ohio, and Texas.

Trump's stance hinges on the idea that tariffs alone can strengthen domestic manufacturing, proposing a 25 percent levy on imported semiconductors and related materials, arguing such duties would push companies to build factories at home. 

‘A direct threat to America’s high-tech economy’

Experts caution that Trump’s tariff-based approach introduces confusion for firms reliant on dependable, long-term policy commitments.

Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation, emphasises that businesses depend on “certainty, predictability, and stability” and may hesitate to invest if they fear abrupt policy changes.

Ezell notes that Trump's focus on tariffs could have unintended economic consequences beyond semiconductor companies. 

"Even if tariffs were only on actual imported semiconductors themselves, this would raise the cost of everything from data centers for AI LLMs (large language models) to automobiles and appliances," Ezell says, revealing the pervasive nature of semiconductor technology in modern manufacturing supply chains.

A single new automobile typically contains between 1,500-3,000 semiconductor chips controlling everything from engine management to safety systems, reflecting how tariff-induced cost increases could compound significantly in finished consumer products.

However, Ezell argues that the consequences go beyond immediate consumer impacts. He sees Trump's reliance on tariffs as fundamentally disconnected from contemporary economic realities, describing it as anachronistic and "a direct threat to America’s high-tech economy."

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Why the Act matters

The CHIPS Act emerged as a bipartisan response to global chip shortages, supply chain disruptions, and rising competition with China for advanced chips. 

The allocated $39 billion in subsidies and an additional 25 percent investment tax credit were designed specifically to offset higher US manufacturing costs compared to East Asia.

Without these incentives, US chipmakers confront factory construction costs that are between 20 percent and 50 percent higher than those in China, widening the competitive gap and risking a further loss of market share to Chinese rivals.

Intel, TSMC, Samsung, and Micron secured grants or binding agreements during the Biden administration, supporting significant facility expansions and new investments in the US.

Given the significant sums already committed, any attempt by the current administration to revoke or restrict this funding faces considerable legal and logistical challenges. 

Congress explicitly allocated these funds through 2026, meaning the White House has limited flexibility in altering the flow of already appropriated money. 

Ezell explains that the president remains legally obligated to distribute the entire $39 billion in CHIPS Act grant funds that Congress has already approved.

"In theory, the Trump administration could use rescission or impoundment measures to target funds that were duly appropriated and obligated by Congress (though that seems unlikely here),” Ezell explains.

“More likely, the administration would slow-walk some of the disbursements or change some of the contract terms”.

In other words, the government can only trigger clawback provisions in cases of “non-performance”—meaning if a company fails to deliver on what it promised.

Officials from Arizona, Texas, and Ohio stress that building comprehensive semiconductor facilities requires years of consistent policy support, and even partial funding disruptions could jeopardise workforce training and cost projections.

Eliminating subsidies could significantly increase costs for constructing semiconductor factories domestically, outweighing any tariff-driven savings. However, the White House insists that import duties would replace public funding and still encourage firms to expand domestically.

Ezell believes this scenario poses a deeper threat to America's long-term trajectory in the global semiconductor race.

“If Trump’s policies are not genuinely focused on competitiveness and innovation by helping American firms through investments in R&D, skills development, technology, smart regulatory frameworks, and public-private partnerships, then it’s only going to harm America’s long-term semiconductor and high-tech sector competitiveness,” he says.