New Chips Act Worries Emerge as Trump Continues Attacks
The loss of funding under the Chips and Science Act of 2022 could mean companies will retreat from investments they’re making in the U.S., experts said Thursday during an Information Technology and Innovation Foundation webinar. Advanced chips are critical to smartphones and many other devices made and sold in the U.S., they noted. Few smartphones are made in the U.S., but chips are integral to other wireless gear manufactured here. Experts also said investment in chip research helps drive innovation in the communications sector.
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While some observers expected investments under the act that were of interest to the communications industry to survive the Donald Trump administration (see 2501220071), the new president continues assailing grants Congress approved during the Joe Biden administration. Trump was sharply critical of the act on the campaign trail, saying subsidies were a bad idea (see 2412090046).
Trump told Republican lawmakers this week that he plans sharp tariffs on imported chips and semiconductors and has no interest in continuing Biden-era subsidies. Funds for the Chips Act were among those that OMB froze this week, although the administration later rescinded the order (see 2501290047).
Investments in fabs and research through the Chips Act helped the U.S. “double down” in areas where it’s strong, like the design of smartphones and other devices and innovation, said Eric Breckenfeld, director-technology policy at Nvidia. “The strength is not permanent -- it is something that you have to reinvest in to maintain.”
When Taiwan’s TSMC announced it would build semiconductor fabs in Arizona, “it was with the understanding” there would be federal incentives, said Nick Montella, TMSC director-global government affairs. “We’re hopeful that these programs will continue.”
Building fabs in the U.S. is more expensive than in Taiwan and other countries, Montella noted. “Part of it is the scale of the industry,” he said. Taiwan has made chips for decades, and “you gain economies of scale across the supply chain.” In the U.S., “you’re starting from zero."
The cost of competing in the semiconductor industry is “staggering,” said Stephen Ezell, ITIF vice president-global innovation policy. Semiconductors are the world’s “most R&D and capital intensive” sector. The cost of designing a single advanced chip is $750 million, while a 2 nanometer fab costs upward of $30 billion to build, he said.
Building and operating a fab in the U.S. costs 30% more than building one in Asia, Ezell said. Those higher costs are a “combination of wage rates, regulatory permitting policies” and “conglomeration effects."