Chip makers count on the Senate for the fate of the Chips Act

The Senate’s draft tax bill is set to raise the tax credit for semiconductor manufacturers to 30% for factory investments. This is up from the current 25%. 

This change encourages chip manufacturers to invest more in new facilities before the tax benefit runs out at the end of 2026. 

It will also boost a subsidy for chipmakers to build factories in the US.

Chip makers count on the Senate for the fate of the Chips Act

President Joe Biden signed the Chips and Science Act in 2022. This was one of the main pillars of his domestic policy, aiming to use government support to reverse a shift in semiconductor production from the United States to Asia.

It offered $39 billion in grants and as much as $75 billion in loans, but the biggest advantage of the law was its 25% tax credit for projects. 

The biggest beneficiaries include Intel Corp., Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co., and Micron Technology Inc. The tax credits are likely the largest portion of Chips Act incentives issued to any company in nearly all cases.

In the meantime, Trump has urged repeal of the Chips Act, even if lawmakers of both parties have exhibited little enthusiasm for getting rid of subsidies that lead to high-paying jobs in their districts.

On the other hand, in place of the legislation, officials from the administration, including Commerce Secretary Howard Lutnick, are renegotiating deals with semiconductor makers to negotiate larger investments without new taxpayer funding.

The Senators aim to send the tax bill — which would deliver trillions of dollars in tax cuts for households and businesses — to Trump’s desk by July 4. 

Additionally, the bill is expected to be revised in the Senate before being put to a floor vote. The House must also approve the final version before it can become law.

Trump firmly supports his tariff policies as effective in increasing investment in the US 

President Donald Trump’s trade war and his push to bring manufacturing back to American shores threaten one of his predecessor’s signature achievements: the Chips and Science Act.

The bipartisan law is Washington’s $52 billion effort to boost the American semiconductor industry. This plan aims to lessen the United States’ dependence on Asia for the tiny parts essential to today’s economy, as they are used in everything from smartphones to missiles. 

The Chips Act has prompted nearly $450 billion in promises to create factories in the United States — nearly $10 in private-sector investment for every $1 spent by the government.

Despite this, Trump has complained that the program is a “waste” of taxpayer funds, calling it a “horrible, horrible thing” in remarks to Congress. Additionally, the president maintains that tariffs are more effective than subsidies in spurring investment in the US. He has also hinted he would levy fresh import duties on semiconductors “down the road.”

Therefore, according to him, these are enough reasons for the Republicans, who hold majorities in both chambers, to repeal the law.

However, there are indications that Trump sees import taxes and direct funding as options that can work together. In support of this, a month after he suggested getting rid of the Chips Act, he signed an executive order to create a new office. 

This office will manage the Chips Act funds and try to negotiate “better deals” than those made by the Biden administration. This shows he might want to put his mark on the program instead of completely eliminating it. 

Lutnick urges other companies to follow TSMC’s lead

Howard Lutnick said at his January confirmation hearing that he plans to take a look at the Chips Act awards given out under the Biden administration and ensure he receives what he refers to as the “benefit of the bargain.”

A new group in the Commerce Department, known as the United States Investment Accelerator, is now taking on the review role. Trump established this office in March with an executive order that “aims to negotiate much better deals” than Biden’s.

The main goal for Trump’s team is to encourage more announcements like TSMC’s, which said in March it would invest an extra $100 billion in US plants. This adds to a previous commitment of $65 billion — all without increasing its Chips Act grants. 

Both Trump and Lutnick believe that the threat of tariffs influenced this decision, while TSMC pointed out that strong market demand drove its growth in the US. 

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