After the US Secretary of Commerce Ross announced that the Trump administration was discussing holding shares in Intel, a US government official recently further disclosed the policy orientation. Specifically, the Trump administration currently has no plan to hold shares in semiconductor companies that have promised to increase their investment in the US. However, for companies that have not made such promises, they may need to offer partial ownership as a condition to receive subsidies from the Chip and Science Act.
Earlier this week, Ross said that the US government is discussing the possibility of holding a 10% stake in Intel, and similar measures could also be applied to other companies. Reports indicate that the US government is discussing how to exchange equity for subsidies in other tech companies such as Micron, TSMC, and Samsung.
Actually, the Trump administration has been promoting chip companies to increase their investment in the US. On the 7th of this month, Trump stated that he would exempt companies that invest more in the US from the 100% chip import tariff. He also warned companies not to try to avoid their commitment to build factories in the US, stating that if they say they will build a plant but ultimately fail to do so, they will have to pay accumulated fees and face charges later.
Professor Ma Hong from the Department of Economics at Tsinghua University’s School of Economics and Management previously stated to First Finance that in history, the US had forced Japanese car companies to invest and build factories on a large scale in the US through tariffs. However, the degree of global industrial division and the complexity of supply chains in modern times have far surpassed those in the 1980s. Therefore, it remains to be observed whether similar measures can achieve their intended effects, and the implementation costs will be much higher than those in previous times.
“The current US government may not have enough patience,” said Ma Hong. “In fact, similar policies implemented by Trump during his first term did not achieve significant results.”
“If there is increased investment, there is no need to exchange equity for subsidies.”
In August 2022, then-US President Biden signed the chip bill committing $39 billion to revive local semiconductor manufacturing. The goal is to increase US chip production capacity from 12% to 20% by 2030. According to the Semiconductor Industry Association (SIA), the US chip program office has announced $32.542 billion in grants and $5.5 billion in loans to fund 48 projects in 32 companies. Among them, Intel is eligible for $8.5 billion in direct funding and a loan of $11 billion, mainly for new and expanded wafer factories in Ohio and other locations.
TSMC received a subsidy of $6.6 billion and a loan of $5 billion for the construction of a large factory in Arizona, which began chip production by the end of 2024. Additionally, Samsung and Micron received subsidies of $6.4 billion and $6.14 billion respectively, to promote chip production in Texas and New York.
“The Biden administration is actually giving away money to Intel, TSMC, and other companies for free.”
Lutnik commented that the Trump administration changed this approach, with the latter’s thinking being, “Hey, we’re giving you money, but we want equity. If we provide funding, we want a piece of the pie.”
Such measures have clearly met opposition from businesses. It is reported that insiders said TSMC executives have held initial discussions on the matter, and if the US government demands equity ownership, they may consider returning the subsidy.
The aforementioned US government officials stated on the 21st (local time) that the US government does not intend to hold equity in companies like TSMC that are increasing their investment, “The Department of Commerce does not intend to acquire equity from TSMC or Micron,” but companies that do not increase their investment commitments may need to exchange equity for subsidies.
In March, TSMC announced an additional $100 billion investment in its advanced chip manufacturing business in the US, bringing the total investment to $165 billion. In June, Micron announced approximately $200 million in chip manufacturing and research and development investments in New York, Virginia, and Idaho.
Economist Dorothee Hillrichs from the Ifo Economic Institute’s International Economic Center previously told First Financial News that the risk in semiconductor competition lies in wasted investment if economic conditions do not support the establishment of the industry. The key to government intervention policies lies in balancing the “returns” and “risks.” “As an example, if a large amount of money is invested in semiconductor production equipment, but the country does not have a workforce with the necessary operating skills, then these investments are meaningless,” she said.
Changing the funding usage of the Chip Act
Since taking office, the Trump administration has sought to adjust the implementation of the Chip and Science Act. Trump publicly called for the abolition of the act during his congressional speech on March 4th, criticizing, “We invested hundreds of billions of dollars, but it was all for nothing. They took the money and didn’t spend it; it was worthless to them.”
In addition to the “cash for equity” plan, the Trump administration is reportedly considering reallocating at least $2 billion from the chip bill to support development projects for critical minerals. This proposal intends to use the existing budget approved by Congress for semiconductor research and development and chip factory construction, avoiding requesting new expenditures, while enhancing the decision-making power of US Secretary of Commerce in this strategic field.
It is reported that redirecting some funds to mining-related projects is somewhat in line with the spirit of the chip bill, as the semiconductor industry requires a large amount of critical minerals such as germanium and gallium.
In July this year, the US Department of Defense invested $400 million in MP Materials, a US rare earth producer, through preferred stock. This transaction will make the Department of Defense the largest shareholder of the company with a shareholding ratio of about 15%.