As Trump 2.0 approaches, Taiwan’s chip industry braces for a shakeup | Technology

Taipei, Taiwan – With just weeks left in office, outgoing US President Joe Biden and his team are trying to secure billions of dollars in funding to bring US chip manufacturing back ashore.

Signed In 2022, it was passed into law by BidenThe CHIPS and Science Act provided $280 billion in funding to boost domestic semiconductor research and manufacturing in the U.S., including $39 billion in subsidies, loans, and tax credits for both U.S. and foreign companies.

The law received bipartisan support in Congress and was widely welcomed in both Democratic and Republican states eager to attract state-of-the-art manufacturing facilities and create jobs.

But with President-elect Donald Trump taking office on Jan. 20, the future of the CHIPS Act now appears uncertain, and the Biden administration is racing to finalize complex negotiations with chipmakers and allocate funds.

Shortly before the election, Trump called the legislation “very bad” during an appearance on the Joe Rogan Experience podcast.

“We invest billions of dollars for rich companies,” Trump said.

Trump also accused places like Taiwan, home to the world’s leading semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), of “stealing” the chip industry from the United States.

Most of the 24 recipients of funds under the CHIPS Act are U.S. companies, including Intel, which secured nearly $7.9 billion in direct funding from the U.S. Commerce Department last month.

Four East Asian companies have also signed the CHIPS Act: Taiwan’s TSMC and GlobalWafers and South Korea’s Samsung and SK Hynix.

In recent weeks, the Commerce Department finalized its deals with TSMC and GlobalWafers after earlier signing non-binding memorandums of agreement.

TSMC secured a $6.6 billion grant and $5 billion in loans to build four facilities in Arizona, while GlobalWafers finalized a deal to buy $406 million to build facilities in Missouri and Texas.

Trump cannot unilaterally repeal the CHIPS Act because it was passed by the U.S. Congress, but analysts say he could make it more difficult for the law to work as intended.

As president, he could block or delay the Commerce Department’s distribution of funds, perhaps as part of a cost-cutting effort led by a new government efficiency department. led by tech mogul Elon Musk and entrepreneur Vivek Ramaswamy.

Dan Hutcheson, vice chairman of California-based Tech Insights, said Trump could simply try to renegotiate some of the terms of the CHIPS Act or repackage elements of it to fit the new legislation.

Trump pulled off a similar maneuver with his signature in 2018 US-Mexico-Canada Treaty To replace the substantially similar North American Free Trade Agreement, Hutcheson said.

The Trump administration has borrowed heavily from the wording of NAFTA and the Trans-Pacific Partnership, the free trade agreement with Asia proposed by former President Barack Obama, for the revised agreement.

“What (Trump) really wants is to get his brand on everything … and you see that with all his hotels and resorts and everything else,” Hutcheson told Al Jazeera.

“That’s his typical modus operandi, which I think you can expect to happen with the CHIPS Act.”

Among the CHIPS Act’s Asian partners, Taiwan’s TSMC has made the most efforts to increase US investment.

After earlier signing a non-binding memorandum of understanding, the Taiwanese company last month committed $6.6 billion in grants and $5 billion in loans to build four semiconductor manufacturing plants in Arizona.

Other Asian companies have moved less quickly because of delays and their own business problems over the past two years, according to Chim Lee, senior analyst for China and Asia at the Economist Intelligence Unit.

In April, Samsung signed a non-binding agreement to spend $45 billion to expand its manufacturing facilities in Texas in exchange for a $6.4 billion grant.

Eight months later, there has been no announcement of any progress on the deal.

In October, the South Korean tech giant issued a rare public apology after posting disappointing third-quarter results that it blamed on competition from its Chinese rivals.

Also, there was no further update on the status of SK Hynix’s non-binding agreements announced in April and July to build a $3.87 billion facility in Indiana and GlobalWafers to invest $4 billion in silicon wafer manufacturing in Texas and Missouri, respectively.

Yachi Chiang, a professor of technology law at National Taiwan Ocean University, said many people in Taiwan thought the Trump administration would ask TSMC to invest more than the $65 billion it promised to build three Arizona plants in exchange for U.S. subsidies.

EIU’s Lee said that with a change in administration, companies may be less willing to drag out negotiations.

“Re-negotiations can extend the distribution of funds, if not disrupt part of it. It has been more than two years since the bill was passed. Businesses don’t like to wait and they don’t like uncertainty,” he said.

“Of course it goes both ways. “For some companies, manufacturing in the United States is so expensive that they will not invest unless there are strong incentives.”

Asia’s tech companies have other incentives to keep manufacturing close to home.

South Korea and Taiwan last year passed their equivalents of the CHIPS Act to increase subsidies and tax breaks for firms that invest locally.

Japan approved a $3.9 billion subsidy to domestic chipmaker Rapidus earlier this year, and the Tokyo chipmaker aims to spend $65 billion through public and private sector financing to catch up to its neighbors.

Meanwhile, China recently pledged $45 billion to boost its chip industry in the face of U.S. export controls and efforts to curb access to advanced technology.

Taiwan’s Ministry of Economic Affairs told Al Jazeera that it was inappropriate to comment on the CHIPS Act before Trump takes office.

However, Taipei told Trump it was listening to his concerns.

Shortly after Trump’s election victory, The Financial Times reported that Taiwan was considering a $15 billion arms deal to show the president-elect he was “serious” about defense after criticizing Taiwan for spending more on its military.

At the same time, political gridlock prevails in East Asia, creating uncertainty about how governments will respond to the Trump administration and its economic demands.

While Taiwanese President William Lai Ching-te can reach out to Trump as head of state, he is constrained domestically by the opposition, which holds a majority in the legislature.

In South Korea, Han Duck-soo is acting as interim leader as the country’s Constitutional Court considers whether to remove Yoon Suk-yeol from office after he was impeached for declaring a short-term martial law.

In Japan, Prime Minister Shigeru Ishiba is leading a minority government after his Liberal Democratic Party lost its majority in parliament following snap elections in October.

A run-off election for Japan’s upper house of parliament is scheduled for next year, signaling further uncertainty.

William Reinsch, senior adviser to the economics program at the Center for Strategic and International Studies, said the CHIPS Act is just one of many issues on the minds of East Asian leaders.

“I would expect Korea, Taiwan and Japan to look at the big picture of how to maintain good relations with the United States, rather than just focusing on the CHIPS Act,” Reinsch told Al Jazeera.

“You should expect them to think hard about investing more in the United States, spending more on their own defense budgets, and thinking about how best to align with U.S. policy toward China.”