The Trump administration is considering reallocating at least US$2 billion from the CHIPS Act to fund critical minerals projects, according to two sources familiar with the matter.

This move would shift funds intended for semiconductor research and factory construction to projects aimed at reducing US reliance on China for minerals used in electronics and defense.

The CHIPS Act, signed in 2022, was designed to boost domestic semiconductor production and research.

Sources said the administration also plans to give Commerce Secretary Howard Lutnick a larger role in overseeing critical minerals financing.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ The $2 billion reallocation highlights America’s uphill battle against entrenched global supply chains

The proposed $2 billion shift from semiconductor to critical minerals funding reflects the scale of America’s strategic challenge in both sectors.

While significant, this reallocation represents less than 4% of the total $52.7 billion CHIPS Act budget, yet it must compete against China’s 85-90% dominance in global rare earth elements refining capacity1.

The U.S. semiconductor industry’s decline from 37% of global manufacturing in 1990 to just 12% in 2020 demonstrates how quickly technological leadership can erode without sustained investment2.

Asian competitors are investing at massive scale. TSMC alone planned $40 billion in 2022 while Samsung committed $355 billion over five years, making the entire $52 billion CHIPS Act appear relatively modest by comparison2.

This context suggests the administration faces a fundamental resource allocation dilemma: spreading limited funds across multiple critical technology sectors while competitors focus massive resources on dominating specific supply chains.

2️⃣ Processing capacity emerges as the critical bottleneck beyond raw material access

The administration’s focus on processing and recycling firms addresses a key vulnerability that goes beyond simply mining more materials.

The U.S. identified 50 minerals as critical in 2022, with significant reliance on foreign sources for most3, but the deeper challenge lies in China’s stranglehold on refining capabilities rather than just raw material deposits.

While Canada leads globally with 508 million tonnes per annum of critical mineral production overseas and Australia holds lithium reserves valued over $425 billion4, these advantages mean little without domestic processing infrastructure.