The US Commerce Secretary Howard Lutnick said the Biden-era semiconductor grants are being renegotiated under President Trump to ensure better taxpayer value, and some awards may be canceled.

The Chips and Science Act, signed in 2022, allocated US$52.7 billion to boost US semiconductor production and cut dependence on Asian suppliers.

Major semiconductor firms, including Taiwan’s TSMC, South Korea’s Samsung and SK Hynix, and US-based Intel and Micron, received funds from the grants.

TSMC, which originally secured a US$6 billion grant, has committed to raise its US investment from US$65 billion to US$165 billion following renegotiations, though the company declined to comment.

Lutnick noted that some initial agreements were overly generous and emphasized the US aim to maintain over 50% of global AI computing capacity.

These changes follow reports of delayed disbursements and revised grant terms, with funding tied to companies meeting specific expansion milestones.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Government-industry partnerships in semiconductors have a long strategic history

The current CHIPS Act renegotiations reflect a decades-long pattern of evolving government support for semiconductor manufacturing that dates back to the industry’s earliest days.

In the 1950s and 1960s, government agencies like NASA and the U.S. Air Force were critical early customers for companies like Fairchild Semiconductor, with the Apollo program alone ordering 100,000 devices in 1964 1.

This government-industry relationship has evolved from primarily customer-supplier arrangements to more complex partnerships like Sematech (established 1988), which received $100 million annually from the Defense Department and successfully reduced R&D cost increases from 30% to 12.5% 2.

The semiconductor industry generates exceptional returns on public investment, with each federal dollar invested yielding approximately $16.50 in GDP according to industry research 3. This helps explain why successive administrations continue to prioritize this sector despite policy differences.

The Trump administration’s approach of demanding more private investment for the same government funding reflects this historical pattern while emphasizing greater efficiency in public expenditure. For example, TSMC’s increased commitment from $65 billion to $165 billion while maintaining the same $6 billion government award highlights this shift.

2️⃣ U.S. semiconductor strategy responds to dramatic global market share decline

The renegotiation of CHIPS Act grants is occurring against a backdrop of severe U.S. market position erosion in semiconductor manufacturing that has created both economic and national security vulnerabilities.