The semiconductor industry has emerged as a battleground in the closely contested US election.

Although the CHIPS and Science Act passed with bipartisan support two years ago, it has become a political flashpoint in recent weeks with several high-profile Republicans criticizing it and even calling for its repeal. The CHIPS Act included more than $52 billion in total appropriations for boosting domestic chip production and research. Of the total, $39 billion was earmarked for incentives to help chipmakers to onshore, expand or update their manufacturing facilities.

During a recent appearance on "The Joe Rogan Experience" podcast, former President Donald Trump panned the CHIPS Act, saying it gave billions of dollars to rich companies. A better strategy, he said, would have been to raise tariffs high enough that companies were forced to build chips domestically. Following Trump's remarks, House Speaker Mike Johnson, R-La., told reporters that the Republican Party "probably will" try to repeal the CHIPS Act, but later clarified that he could envision legislation that streamlined and improved the law.

Vice President Kamala Harris, meanwhile, has touted the Biden administration's industrial policy and the CHIPS Act in particular for creating domestic jobs and helping the US compete with China. "It is my plan and intention to continue to invest in American manufacturing, the work being done by American workers upholding and lifting up good union jobs,” Harris told reporters in Milwaukee on Nov. 2 after Johnson's remarks.

While Trump did not get into specifics on how he would amend the CHIPS Act or seek to rescind any of the funding, the candidates' contrasting stances on the legislation have highlighted their different tacks when it comes to encouraging domestic chip production.

"Both the Trump and Harris camps have different ways of looking at global politics and could wield these CHIPS Act funds in different ways," said S&P Global Market Intelligence Kagan analyst Neil Barbour. "Perhaps some would be more defense-oriented, and perhaps others would be more oriented toward keeping the current production interest of top electronics companies secure."

Money spent

Barbour noted that even if Trump wanted to, it would be difficult to rescind funds that have already been allocated under the 2022 law.

Intel Corp., Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), Samsung Electronics Co. Ltd. and Micron Technology Inc. have so far absorbed more than 80% of the $32.52 billion in announced direct funding incentives from the CHIPS Act, according to a Kagan analysis.

While the biggest companies have indeed received the biggest funding grants, a number of smaller players have also benefitted. On a campaign stop in Michigan, Harris toured Hemlock Semiconductor LLC, the only US-based maker of hyperpure polysilicon, which is used in the production of fabricated wafers and integrated circuit chips used by leading semiconductor manufacturers. The Commerce Department awarded a federal grant of $325 million to Hemlock in early October.

"Bolstered by the CHIPS Act, we are planning for a once-in-a-generation investment in advanced technologies to continue serving as a top polysilicon supplier to the leading-edge semiconductor market," Hemlock Semiconductor Chairman and CEO Arabinda Ghosh said in a statement.

Other recent funding recipients include Wolfspeed Inc. for projects in North Carolina and New York, and Infinera Corp. for projects in California and Pennsylvania.

The CHIPS Act has not only proven important to the companies building new plants but also to the states where the new plants are based. Arizona, Texas and New York are the top states with projects receiving funding under the CHIPS Act, with each state commanding more than $6 billion, according to Kagan's analysis.

When Johnson said he "probably will" try to repeal the CHIPS Act, he was speaking at a Nov. 1 event in New York for House Rep. Brandon Williams, R-NY, whose district is eagerly anticipating the construction of a Micron semiconductor manufacturing plant supported by the CHIPS Act.

Following Johnson's remark, Williams said, "The CHIPS Act is hugely impactful here," and later said that Johnson misheard the question.

Trying tariffs

Trump, meanwhile, said on "The Joe Rogan Experience" podcast that he would have liked to see the US encourage domestic chip production without spending billions on grants.

"Let me just say, that chip deal is so bad," Trump said. "When I see us paying a lot of money to have people build chips, that's not the way. ... You could have done it with a series of tariffs. In other words, you tariff it so high that they will come and build their chip companies for nothing."

In August 2018, the Trump administration imposed tariffs on Chinese semiconductor imports, including chips, wafers and displays. Those tariffs have remained in place under the Biden administration and are even set to increase in January 2025. US semiconductor imports from China have fallen substantially since the tariffs were first imposed, according to Panjiva. While China was the top source of US semiconductor imports at 28% in October 2017, it was in third place in October 2024 at 15%. The top two places are now held by South Korea and Japan, Panjiva data shows, as Western governments have continued "friendshoring" their supply chains from China.

Trade groups such as the The Semiconductor Industry Association and Chamber of Progress have spoken against tariffs.

"At a time when China is making an unprecedented push for semiconductor dominance, we can't afford to pull the rug out from under American manufacturers and workers who are finally regaining ground in this strategic sector," said Tahra Jirari, director of economic analysis at the Chamber of Progress, a left-leaning coalition representing large US tech companies.

SIA has noted that while high-value activities such as chip design and development occur in the US, chipmakers typically ship their chips to lower-cost geographies for the final stages of assembly, packaging and testing. Tariffs on chip imports have effectively resulted in US chipmakers paying tariffs on their own goods, the association said.

CHIPS on their shoulders

While the presidential candidates debate the merits of the CHIPS Act, the law is already having an impact on the ground.

TSMC's first plant in Arizona produced 4% more usable chips than equivalent plants in Taiwan, according to the company's US division president, Rick Cassidy. TSMC has been promised $6.6 billion in federal grants as part of a $65 billion project in Phoenix featuring the production of current-generation chips. The Arizona project will also eventually include next-generation 3 nanometer and 2 nanometer chips.

The funding is seen as an encouraging step by its proponents, but it should not be viewed as a panacea for the US to recapture its dominance in semiconductor industry, said Scott Lincicome, vice president of general economics at the Cato Institute, a libertarian think tank.

Beyond the CHIPS Act, President Joe Biden signed into law the Building Chips in America Act on Oct. 2, which will streamline federal permitting processes for microchip manufacturing projects and exempt them from environmental reviews usually required by the National Environmental Policy Act. The Senate version, authored by Mark Kelly, D-Ariz., passed unanimously in December 2023. This September, 79 House Democrats voted with Republicans to send the bill to Biden's desk.

The Semiconductor Industry Association projects that the US will grow its share of advanced logic — below 10 nanometer — manufacturing to 28% of global capacity by 2032, up from 0% in 2022. Lincicome called the forecast ambitious and said that the US upping its market share to half that amount is a more realistic best-case scenario.

Lincicome noted that there are more factors at play in the semiconductor market beyond US legislative initiatives.

"The reality is that, at best, in terms of CHIPS Act projections, the US economy and the global economy will still be quite dependent on Taiwan and Korea as well for advanced logic chips," Lincicome said. "The more intellectually honest CHIPS Act advocates will admit that this is just simply about a partial hedge more than any sort of dramatic filtering of the global semiconductor market."

Panjiva is the supply chain research unit of S&P Global Market Intelligence, a division of S&P Global Inc.