Trump’s Victory Speeds Up Semiconductor Law Agreements: The Biden administration is working
hard to finalize agreements under the CHIPS Act with major companies
like “Intel” and “Samsung Electronics” to strengthen one of its key initiatives before the elected president,
Donald Trump assumes office.
The administration views the law and the grants it provides
as a significant achievement that contributes to rebuilding the domestic semiconductor industry.

Content

Challenges and Ongoing Negotiations

Republican Reforms

The Debate Over the CHIPS Act

Semiconductors and National Security

Republican Pressure for Amendments

Company Concerns About Funding

Challenges in Negotiations

Stance of Other Companies

Unresolved Issues

Challenges and Ongoing Negotiations

The Department of Commerce has allocated over 90% of the grants,
estimated at around $39 billion, under the CHIPS and Science Act of 2022.
However, the department has announced only one binding agreement so far.
The following two months represent a critical period
for more than 20 companies that are still in the final stages of negotiations.

Sources familiar with the matter indicated that companies such
as “Taiwan Semiconductor Manufacturing”
and “GlobalFoundries” have completed their negotiations
and are awaiting the announcement of the final agreement soon.
Meanwhile, other companies—such as “Intel,” “Samsung,” and “Micron Technology”—
are still working on settling key details in their contracts.

Officials are trying to finalize as many agreements as possible
by the end of 2024 to enable the flow of funding to companies that meet the specified performance requirements.

Republican Reforms and Their Impact on Funding

Trump’s victory has added a sense of urgency as the Biden team
aims to secure its industrial policy initiatives from partisan conflicts.
Semiconductor companies also want to avoid renegotiating the terms
of their agreements with the incoming administration.

The CHIPS Act includes billions of dollars in loans, 25% tax credits,
and grants and has encouraged companies to pledge around
$400 billion to build factories within the United States.
The Democratic administration considers this program,
which was approved by both the Republican and Democratic parties,
one of its major accomplishments.
However, President-elect Trump and his allies have recently criticized the law.

The Debate Over the CHIPS Act

Last month, Trump described the initiative
as “terrible” and suggested imposing tariffs would be a better alternative.
Following this, Republican House Speaker Mike Johnson announced
that his party would seek to “reform” the law,
changing his previous statements that suggested Republicans might “likely” seek to repeal it.

Since the election, Trump’s team has not clarified its stance on the matter,
but industry lobbyists agree that the CHIPS Act will largely remain unchanged.

It is worth noting that the Trump administration
had previously courted “Taiwan Semiconductor Manufacturing,”
a global leader in semiconductor production, to build factories in Arizona.
Additionally, federal regulations will require Trump’s second-term administration
to spend the funds allocated under the CHIPS Act,
including $39 billion set aside for direct grants, through the end of fiscal year 2026.

Semiconductors and National Security

Both parties view domestic semiconductor production as a national security priority,
especially given China’s potential threats over the possible invasion of Taiwan,
a major hub for this industry. Semiconductors are the lifeblood of the modern economy,
as they are essential components in all types of consumer and military technologies,
and they remain a key point of tension between Washington and Beijing.
The CHIPS Act enjoys substantial support compared to other Biden initiatives in industrial policy.

Sujay Shifakumar from the Center for Strategic and International Studies in Washington said, ”
Clearly, the election did not change the fundamental geopolitical challenge with China.”

Republican Pressure for Amendments

However, Republicans may seek to amend the CHIPS Act by removing
what they see as social priorities, such as the requirement for childcare facilities
or the mandate for companies to consult with local labor unions
while also addressing the environmental impact of their factories.

A Republican aide said that party members in Congress are already seriously
discussing amending these provisions as part of next year’s budget
reconciliation process if the party can take control of both houses of Congress.
(Republicans have secured a majority in the Senate, while the House of Representatives remains undecided.)

Bloomberg reported that Mike Johnson is considering reducing
environmental requirements beyond current permitting exemptions.
Meanwhile, industry lobbyists plan to push Congress for increased tax credits during critical tax talks next year.

Company Concerns About Funding

Companies’ concerns do not stem from the possibility that the reforms sought
by Republicans will affect the support they receive but rather from the potential delay in funding.
Some industry executives feel it has already taken too long to secure the funds.

A senior U.S. administration official said that several projects have met the initial criteria,
meaning the first tranche of funds could be disbursed once contracts are signed.

Challenges in Negotiations with Major Companies

For Intel, discussions are partly focused on “change of control” provisions,
according to sources familiar with the matter.
These provisions specify what will happen if the company divests
manufacturing operations or is wholly or partially acquired.

This issue is sensitive as Intel faces significant financial challenges.
Bloomberg and other media outlets reported that other semiconductor companies
are either preparing or considering an offer to acquire Intel or part of it.
Intel CEO Pat Gelsinger has pledged to maintain the company’s unity in this context.
Intel confirmed in a statement that it will continue working with the Biden administration to finalize its grant.

Stance of Other Companies like Micron and Samsung

Meanwhile, “Micron” is refusing to join the “National Semiconductor Technology Center,”
a new research and development hub created under the CHIPS Act with a cost of $5 billion
according to sources familiar with the matter.
This membership was one of the requirements for initial grants,
and “Micron” is one of several companies that is now refusing to join.

Micron stated that it continues to work closely with government officials to finalize its incentive package.

As for “Samsung,” it raised concerns among Biden administration
officials last month after a disappointing financial report,
prompting the company to issue a rare apology.
The struggling company has not made significant progress against “TSMC”
in advanced chip production,
and it has not yet announced a substantial customer for its new facilities in Texas.

Discussions with “Samsung” about the CHIPS Act grant have recently resumed after setbacks earlier this year,
according to sources, technical review meetings between the company and government officials had long gaps,
sometimes lasting over a month.

Samsung did not respond to a request for comment,
and the Department of Commerce declined to comment on the ongoing negotiations.

Unresolved Issues in Final Negotiations

Other unresolved issues include a labor provision known as “Davis-Bacon,”
which sets prevailing wages for construction projects funded by the federal government.
Companies are also seeking clarity on the extent of activities they can undertake in China.
Last year, the Biden administration imposed restrictions to protect national security,
limiting the expansion allowed in China for companies receiving CHIPS Act grants.
However, specific details will be clarified in the contracts.

The Biden administration seeks company commitments
to distribute as much funding as possible before leaving office.
This would ensure companies are generally protected from any changes,
except for laws passed by Congress or cases of non-compliance by grant recipients.

The Commerce Department under Trump may
attempt to cancel and renegotiate already-signed federal contracts,
but his team has shown no interest in doing so thus far.

Nevertheless, Biden administration officials know
that Trump-appointed officials will handle some final touches,
including the actual disbursement of most funding.

A Commerce Department spokesperson said, ”
Our team is continuing to implement this bipartisan law in accordance with executive regulations,”
adding that the department “will announce further developments in the coming weeks.”

Trump’s Victory Speeds Up Semiconductor Law Agreements

Trump&#8217;s Victory Speeds Up Semiconductor Law Agreements

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Trump’s Victory Speeds Up Semiconductor Law Agreements