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The future of the CHIPS Act could hang in balance of the presidential election
When the CHIPS and Science Act passed in 2022, it had bipartisan support. Lawmakers from both political parties hailed the law's importance for reviving US chipmaking capacity in the face of China’s growing influence in the semiconductor sector.
But in the final days of the presidential election cycle, the law has become a point of contention between the political parties, putting its future in doubt.
On Friday, House Speaker Mike Johnson, a Republican who voted against the CHIPS Act, drew criticism after suggesting he would consider repealing the program under the Trump administration. He later walked back his statement, saying he would look to “streamline” the permitting process.
Republican presidential nominee and former President Donald Trump, Melania Trump, and House Speaker Mike Johnson attend a dinner in New York City. on Oct. 17, 2024. (REUTERS/Brendan McDermid) ·REUTERS / Reuters
That prompted Vice President Kamala Harris to defend the law, touting the jobs created under the Biden administration’s push to bring manufacturing back to the US.
“That is the way we are going to win the competition with China for the 21st century,” she said.
The exchange also came a week after former President Donald Trump said in a podcast appearance with Joe Rogan that the chip deal was “so bad” and that slapping tariffs on chips imported from Taiwan would be more effective.
'We need to get it finished'
The debate has put major semiconductor companies in an uneasy position as they await grants from the Commerce Department to build out semiconductor manufacturing facilities or foundries. Intel (INTC), Texas Instruments (TXN), Samsung, TSMC, GlobalFoundries (GFS), and Micron (MU) have all been awarded federal money.
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While the law has unlocked nearly $53 billion in funding for roughly two dozen projects intended to bring supply chains back to the US, only one company has received the grant money: Polar Semiconductor, which received $123 million for its chip plant in Minnesota. As for the other companies, the Commerce Department has maintained that individual milestones negotiated to release the money have not been met.
Intel (INTC) has been the biggest beneficiary, with $8.5 billion in grants committed to the chipmaker, though it is still waiting on money from those grants. The company has bet its future on its foundry ambitions, investing more than $100 billion to expand its factories in Arizona, New Mexico, Ohio, and Oregon.
“It's well over two years since the [CHIPS] Act passed, and over that period, I've invested $30 billion in US manufacturing," said Intel CEO Pat Gelsinger in an interview with Yahoo Finance. "We've seen $0 from the CHIPS grants. This has taken too long. We need to get it finished."
Intel CEO Pat Gelsinger shows US President Joe Biden a processor and semiconductor wafer during a tour at Intel Ocotillo Campus in Chandler, Ariz., on March 20, 2024. (BRENDAN SMIALOWSKI/AFP via Getty Images) ·BRENDAN SMIALOWSKI via Getty Images
Further delay in federal funding would likely impact how Intel moves forward with those projects, given the company’s recent struggles. In its most recent quarter, Intel registered a nearly $17 billion loss. The company has already announced plans to cut 15% of its workforce.
Gelsinger insisted the company has the “financial structure” to finish the projects “with or without the CHIPS dollars.” He added that the 25% tax credit tied to CHIPS Act projects has already lifted the company.
"The tax pieces are about three times larger than the grant piece of the CHIPS Act," Gelsinger said. "And with that, we do see that that continues."
Revision over repeal
Analysts remain skeptical of any wholesale repeal of the law, largely because of the national security implications stemming from where chips are manufactured today.
The US manufactures just 14% of the world’s chips, while China produces 21%, according to data from the Semiconductor Industry Association. Taiwan manufactures nearly all advanced chips used in artificial intelligence.
“If you're going to push China further apart, you've got to have some sort of geopolitical, dependable source of semiconductor supply and manufacturing here in the US space,” said John Vinh, managing director and equity research analyst for KeyBanc Capital Markets. “I don’t know what [Trump’s] alternative is.”
House Speaker Johnson has said Republicans would consider streamlining the permitting process for CHIPS Act projects.
Kimberly Forrest, chief investment officer for Bokeh Capital Partners, said she expects revisions to the law and its implementation process. That could lead to further uncertainty for chipmakers, regardless of who wins the White House.
“I think the current administration put a lot of provisions in that may be slowing down actual building of chip plants and chips,” she said. “If either one of them [wins], they’re going to have to look at that and see how quickly they want this CHIPS Act to actually affect how chips are produced in America.”
Democratic presidential nominee and Vice President Kamala Harris speaks at Hemlock Semiconductor during a campaign stop on Oct. 28, 2024, in Saginaw, Mich. (Bill Pugliano/Getty Images) ·Bill Pugliano via Getty Images
The Biden administration has already reversed permitting requirements for some federal projects. Earlier this year, President Biden weakened provisions that mandated recipients of CHIPS Act funding to complete federal environment reviews under the National Environmental Policy Act as a condition for receiving the funding. The move followed lobbying by the semiconductor sector, which argued the requirements would further delay the projects' completion.
“We've actually seen some pragmatism out of the Biden administration in realizing that these chip fabs are not going to be built on this kind of timeline if they don't start accelerating things,” Reva Goujon, a director at Rhodium Group, told Yahoo Finance.
