As Trump 2.0 approaches, Taiwan’s chip industry braces for turmoil | technology

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

I fell To be law by Biden in 2022The Chips and Science Act allocated $280 billion in funding to boost domestic semiconductor research and manufacturing in the United States, 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 states and Republican-leaning states, eager to attract advanced manufacturing facilities and create jobs.

But as President-elect Donald Trump prepares to take office on January 20, the future of the CHIPS Act now appears uncertain, leaving the Biden administration racing to finalize complex negotiations with chip makers and distribute the funds.

During an appearance on “The Joe Rogan Experience” shortly before the election, Trump criticized the legislation as “very bad.”

“We have allocated billions of dollars to wealthy corporations,” Trump said.

Trump also accused places like Taiwan, home to the world’s largest producer of advanced semiconductors, Taiwan Semiconductor Manufacturing Corporation (TSMC), of “stealing” chip manufacturing from the United States.

Most of the 24 recipients of funds under the CHIPS Act are American companies, led by Intel, which last month received nearly $7.9 billion in direct funding from the US Commerce Department.

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

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

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

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

As president, he could block or delay the Commerce Department in distributing funds, perhaps as part of a cost-cutting effort led by the new so-called Department of Government Efficiency. Led by technology mogul Elon Musk and businessman Vivek Ramaswamy.

Trump may simply try to renegotiate some of the terms of the CHIPS Act or repackage its elements under new legislation, said Dan Hutcheson, vice president of California-based Tech Insights.

Trump carried out a similar maneuver in 2018, signing an agreement United States-Mexico-Canada Agreement Hutchison said the agreement would replace the largely similar North American Free Trade Agreement.

The Trump administration borrowed heavily from the wording of the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership, a free trade agreement with Asia proposed by former President Barack Obama, for the revised agreement.

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

“It’s his typical modus operandi, which I think you can expect to happen with Chips Law.”

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

After earlier signing a non-binding memorandum of agreement, the Taiwanese company last month provided $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, hurt by delays in the past two years and the trade challenges they face, according to Chim Lee, senior China and Asia analyst at the Economist Intelligence Unit.

In April, Samsung signed a non-binding deal to spend $45 billion to expand its production facilities in Texas in exchange for $6.4 billion in grants.

Eight months later, no progress on the agreement has been announced.

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.

There were also no further updates on the status of non-binding agreements, announced in April and July, respectively, for SK Hynix to build a $3.87 billion facility in Indiana and Global Waves to invest $4 billion in Silicon wafer production in Texas and Missouri.

Yachi Chiang, a professor of technology law at National Taiwan Ocean University, said many people in Taiwan believe the Trump administration will ask TSMC to invest more than the $65 billion it pledged to build three factories in Arizona in exchange for U.S. support.

With a change in administration, companies may be less willing to extend negotiations further, said Lee of the Economist Intelligence Unit.

“Renegotiating could prolong the distribution of funds, if not undermine some of them. It has already taken more than two years to allocate (the funds) since the bill was passed. Companies do not like to wait and do not like uncertainty,” he told Al Jazeera.

“Of course, this goes both ways. For some companies, production in the US is so expensive that they will not commit to investing unless there are strong incentives.

Technology companies in Asia have other incentives to keep production closer to home.

Last year, South Korea and Taiwan enacted the equivalent of the CHIPS Act to enhance subsidies and tax breaks for companies that invest domestically.

Japan earlier this year approved $3.9 billion in subsidies for local chipmaker Rapidus, and Tokyo aims to spend up to $65 billion through public and private financing to catch up with its chip-maker neighbors.

Meanwhile, China recently pledged $45 billion to support its chip industry in the face of US export controls and other attempts to limit its acquisition of advanced technology.

Taiwan’s Ministry of Economic Affairs told Al Jazeera that it would not be appropriate to comment on the CHIPS Act before Trump takes office.

However, Taipei signaled to Trump that it was listening to his concerns.

Shortly after Trump won the election, the Financial Times reported that Taiwan was considering a $15 billion arms purchase to show the president-elect that it was “serious” about its defense after his criticism that it should spend more on its military.

Meanwhile, there is political gridlock across East Asia, creating more uncertainty about how governments will respond to the Trump administration and its economic demands.

While Taiwanese President William Lai Ching-te can deal with Trump as head of state, he is constrained at home in terms of policy by the opposition, which has a majority in the legislature.

In South Korea, Han Dak-soo is serving as interim leader while the country’s Constitutional Court considers whether to remove Yoon Suk-yeol from office after he was removed due to a short-lived declaration of martial law.

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

A second election is scheduled for next year for the upper house of Japan’s parliament, portending more uncertainty ahead.

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

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

You should expect them to seriously consider investing more in the United States, spending more money in their defense budgets, and thinking about how best to align themselves with US China policy.