The semiconductor industry in the US is navigating a landscape of uncertainty as Donald Trump’s call to repeal the Chips and Science Act sends ripples through the sector. Despite the industry’s cautious optimism, the potential for disruption remains a pressing concern. Since the act’s authorization in 2020, it has catalyzed $540 billion in private investment, underscoring its pivotal role in bolstering domestic supply chains. However, Trump’s recent appeal to Congress to “get rid of” the law has introduced an element of volatility, leaving industry experts to ponder the programme’s future.
Greg Louer, a partner at Holland & Knight in Washington DC, acknowledges the variability in opinions regarding the programme’s safety. “There are varying opinions about how safe the programme is or how much volatility it may be subject to,” he says. While a change in administration could introduce new policy priorities, Louer does not foresee dramatic disruptions to the Chips programme’s security. “But I don’t necessarily see material changes happening to the Chips programme that will dramatically disrupt [its] security,” he adds.
The Biden administration, in a race against time, announced on January 10 that it had awarded $34 billion—89% of the Chips Act funding. However, only $4 billion has been disbursed, as grants are paid upon reaching specified milestones. This leaves a significant portion of the funds in a state of limbo, vulnerable to potential policy shifts.
The likelihood of a full repeal of the Chips Act is considered low, given its bipartisan support and the public backing from lawmakers in regions that have benefited from the programme. Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation, notes, “There’s no energy in Congress for repeal.” However, companies are exploring all potential avenues the government might use to halt the programme. If the law were repealed, the safety of any funding would depend on its status in the award process. Funds not yet awarded (around $5 billion) could be redirected to other spending programmes. Conversely, grants already paid to recipients would be safe, as the government can only claw back money if a ‘clawback event’ has occurred, such as investments in or licensing agreements with companies from countries of concern like China.
The status of the approximately $30 billion in grants awarded but not yet disbursed is more complex. Reneging on these funding obligations would be difficult and has little precedent. “The Trump administration is really compelled to expend those funds,” says Ezell. However, with Congress’s approval, the administration could invoke the Impoundment Control Act to cancel spending plans already appropriated by Congress, potentially ensnaring unpaid grants.
Without a repeal, the administration could attempt to avoid payments by claiming that project milestones have not been met. Jeff Le, a fellow at George Mason University’s National Security Institute, points out that the government has used underperformance to justify cost-cutting initiatives in the past. The Department of Commerce (DoC), which operates the Chips programme, could also renegotiate grant contracts. However, any changes must be consensual and are expected to involve environmental and labour standards rather than funding.
The industry, however, remains hopeful. Sarah Kreps, a professor in the department of government at Cornell University, notes that initial panic in regions like upstate New York, where Micron plans to invest $100 billion, seems to be dissipating. “But that seems to be dissipating as the dust is settling to suggest [grants have] more lock-in” than originally feared. Louer’s interactions with the DoC since January suggest that the programme is continuing its mission despite the political noise.
Irrespective of the path taken, any attempt to alter Chips Act funding is expected to be contested in the courts, alongside many of Mr Trump’s other cost-cutting measures. The semiconductor industry’s future hangs in the balance, but its resilience and the bipartisan support for the Chips Act offer a glimmer of hope amidst the uncertainty.
This political tug-of-war is not just about funding; it’s about the future of technological innovation and national security. The semiconductor industry is a linchpin in the global supply chain, and any disruption could have far-reaching consequences. As the industry watches and waits, the outcome will undoubtedly shape the trajectory of construction and development in the sector. The intersection of politics and technology has never been more pronounced, and the construction industry is at the forefront of this evolving landscape.
