Did "Trump's Policies" Backfire? Potential Prosperity of US Semiconductor Manufacturing Industry Clouded

Since taking office, US President Trump has been wielding the "tariff stick" against countries worldwide under the slogans of "America First" and "bringing manufacturing back to the US." However, in reality, there was already an industry striving to bring its operations back to the US long before that: the semiconductor industry.

Yet, Trump's current "efforts" are overshadowing the potential prosperity of the semiconductor sector.

Currently, the US government is taking the next step, planning to impose more tariffs on key imported goods and launching investigations into the imports of computer chips and chip-making equipment, just as deep investments in the semiconductor sector are beginning to have a positive impact on supply chain transformation.

Analysts warn that the new tariffs, combined with the government's threat to amend the CHIPS and Science Act, could significantly delay the US's goals of ensuring a competitive edge in AI development.

Mario Morales, an analyst at the International Data Corporation (IDC), said, "You're already starting to see some impact. Samsung announced a delay in the construction of its wafer fab in Texas. The plant, originally scheduled to start production in 2024, is now postponed to 2028.

"I think some companies are delaying because they now know they might not get funding, or because of the uncertainty surrounding new trade policy-related bills." he added.

It is well known that the Trump administration views chip production as a national security issue and aims to reduce the US's reliance on imported chips. It also intends to explore the impact of various factors on US competitiveness, such as the over-concentration of computer chip production and foreign government subsidies.

Alvin Nguyen, a senior analyst at Forrester Research, said,the uncertainty surrounding the government's tariff policies will lead to confusion in terms of supply chain impacts,"because it's very complex to track where materials and finished goods are produced and assembled."

For example, amid ongoing tariff uncertainty, video game companies have already started raising prices for gaming equipment.

Barry Broome, the Chairman and CEO of the Greater Sacramento Economic Council (a city located in the central part of California, US, on the Sacramento River basin), said he believes Trump's tariffs are aimed at restructuring global relations. However, he also pointed out that he hopes negotiations will "end quickly" because uncertainty in trade policies is detrimental to the market.

"If tariffs are used as leverage to secure a better deal in the next two to three months, then we'll be back soon and will benefit from it. But if they are seen as long-term policies, I believe they will truly deter capital markets from putting real money on the table," he said.

Early Efforts

In fact, long before Trump launched the "trade war," the US semiconductor industry was already striving to bring business back to the US, and it was making good progress. In recent years, with the help of government incentives, both US and overseas tech companies have invested hundreds of billions of US dollars in the US to support semiconductor operations across the country—R&D, manufacturing, and facility modernization.

The growth of the US semiconductor industry is most evident in the Greater Sacramento area. For years, tech leaders and legislators there have been seeking to enhance California's capacity to produce chips, which are widely used in everyday necessities such as cars, refrigerators, and smartphones.

Semiconductor giants gathered in the cities surrounding Silicon Valley—Intel, AMD, Bosch, Samsung, and Micron—are building on the technological foundation laid by Intel when it established a campus in Sacramento County in 1984.

Although the US is a major producer of certain types of semiconductor chips, according to data from the Semiconductor Industry Association (SIA), the US share of global chip production (measured by quantity, not US dollar value) fell from 37% in 1990 to 10% in 2022. As a result, the country heavily relies on imports of advanced chips from Taiwan, China, and South Korea.

Major manufacturers such as TSMC are investing in building factories in the US, thanks in part to incentives introduced during the administration of former President Biden. The CHIPS Act, passed with bipartisan support in 2022, aims to revitalize the US semiconductor manufacturing industry, enhance the US's edge in military technology, and minimize future supply chain disruptions.

According to a May 2024 report by the SIA and the Boston Consulting Group, due to the CHIPS Act, the US semiconductor manufacturing capacity is expected to more than triple in the coming years, representing the highest growth rate in the world during the same period.