MW Trump hates the U.S. Chips Act. Here's what could happen next.

By Therese Poletti

Intel is viewed as 'being left on the side of the road' by the Trump administration

President Trump made no bones about his distaste for the U.S. Chips Act during his congressional address Tuesday night - raising questions in the semiconductor industry about the future of the program and the role some U.S. companies will play going forward.

Trump also touted a recent agreement with Taiwan Semiconductor Manufacturing Co. Ltd. $(TSM)$ (TW:2330) in which the world's largest chip-manufacturing company promised to invest $100 billion into building more factories in the U.S., in addition to $65 billion already planned. The latest agreement was not through any funding from the Chips Act, which funded $6.6 billion toward TSMC's Arizona plants last November.

Trump's latest stance made it seem likely to investors that he is no longer trying to parlay any kind of deal for Intel Corp. $(INTC)$ as Wall Street had speculated in the last month, which led to a big jump in its stock.

According to the Wall Street Journal, Intel Interim Chairman Frank Yeary held talks with Trump administration officials last month, expressing concerns about Intel's future. Per the report, TSMC had studied controlling all or parts of Intel's chip-making plants, potentially under a consortium, as part of a move that would break Intel in two. Some analysts have also speculated that the Trump administration has been working to get more U.S. chip companies to use Intel's manufacturing facilities, in addition or as an alternative to TSMC's.

Shares of Intel were down more than 2.5% in late-afternoon trading Wednesday.

"I think Intel has been left at the side of the road," said Robert Maire, president at Semiconductor Advisors.

Maire and many other analysts have not been in favor of any sort of partnership between Intel and its fiercest rival TSMC, saying it never would worked. And in recent weeks, there have been positive reports that Intel's much-anticipated next-generation manufacturing process, called 18a, is yielding good results.

"I don't know why we are having these conversations - they keep telling us 18a is fine," said Bernstein Research analyst Stacy Rasgon. "They keep telling us 18a is on track. I don't think they are desperate for cash."

Rasgon also said he expects Intel's next chip line - code-named Panther Lake, and the first product to go in production on 18a - to launch at year-end. High-volume production is expected in 2026.

The Chips Act was created by Congress to encourage the semiconductor industry to build more plants in the U.S., and it would take an act of Congress to actually kill the Chips Act. That said, the so-called Department of Government Efficiency (DOGE) has already laid off about a third of the staff in the Commerce Department that was associated with administering funds.

Read: The Chips Act may be dead. That's another big hurdle for the semiconductor industry.

"I do not think the president will find much support in Congress for undermining these chips investments and the massive amount of jobs they are creating," Senate Minority Leader Chuck Schumer, a New York Democrat, said in a statement.

One possibility, Maire said, is that the projects that were promised funding in the last few months of the Biden administration will not get funded. "The new money promised, those deals promised at the end of the Biden Administration, I think those are all toast," he said. "[Trump] is going to undo all that."

In addition to TSMC's award of $6.6 billion in the last two months of 2024, other big award recipients from the Chips Act included Samsung Electronics (KR:005930), which was awarded $4.75 billion for its plans to invest $37 billion in central Texas for two fabs and an R&D facility. Texas Instruments Corp. $(TXN)$ won $1.61 billion in direct funding, as part of its plans to spend $18 billion through the end of the decade on three plants - two in Texas and one in Utah. Micron Technology Inc. $(MU)$ was awarded an additional $6.4 billion toward its plan to spend $100 billion on two high-volume manufacturing plants in Clay, N.Y., and $25 billion in Idaho.

"Most of the capex was coming from the companies anyway," said Rasgon. "It was meaningful but it was not material." He added that the tax credits were probably the more meaningful element of all the deals forged.

Commerce Secretary Howard Lutnick said during his confirmation hearings that he wants to review the awards finalized under President Biden. Trump said in his comments Wednesday night that whatever is left over from the Chips Act should be used to reduce the U.S. debt.

Raymond James's Washington policy analysts said in a note to clients that they believed the Chips Act is unlikely to be repealed and the 25% tax credit for capital expenditures is likely to remain. They echoed Maire's concerns about existing contracts that have not yet been funded.

"Aadditional grants will become increasingly unlikely," the analysts wrote. "A bigger debate will be on changes to existing Chips Act rewards. There is an argument that could be made that Trump's criticism could be used as an excuse to rework existing contracts, but also comes with concern that these changes could usher in new uncertainty for existing awards."

-Therese Poletti

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March 05, 2025 15:59 ET (20:59 GMT)

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