Trump’s tariff‑shaped stick can’t beat reality on US fabbing • The Register
Comment Ending America’s reliance on foreign chip fabs remains a high priority for Uncle Sam, but the Trump administration’s “my way or the highway” approach to the issue threatens to do more harm than good.
Where the Biden administration sought to use federal subsidies and tax breaks as a carrot to encourage investment in domestic chip production, the current administration’s philosophy can best be described as a stick wielded by a capricious bully, unconcerned whether or not his demands can be met, only that concessions are made.
In some respects, it reflects a modern economic take on Roosevelt’s Big Stick ideology, only Trump seems to have ignored the speaking softly bit and jumped straight to swinging his stick like every problem is a piñata with candy inside. Trump need not even swing his stick – all he has to do is make a threat, and those in its path scramble to appease him. And whether you agree with this approach, as life-alteringly disruptive as they might be, he has been effective at getting US companies to bend to his will.
Last month, the US claimed a 10 percent stake in Intel. The $8.9 billion equity deal drew on previously awarded but unpaid CHIPS Act funds, along with the Secure Enclave program. The congressionally-approved funds had already been awarded to the x86 giant, but only a fraction of them had been distributed when Trump took office.
In March, the threat of massive chip tariffs drove Taiwan Semiconductor Manufacturing Co. (TSMC) to bolster its investment in US manufacturing to the tune of $165 billion. Many months later, the White House still hasn’t pulled the trigger on said tariffs.
However, as the Wall Street Journal reported on Friday, that could soon change. The Commerce Department is reportedly weighing whether to require US tech companies to manufacture one chip in the US for every chip imported, or pay a tariff. That tariff, Trump warned last month, could be as much as 100%.
Commerce Secretary Howard Lutnick is said to have discussed the idea with industry executives, arguing the measures may be necessary to maintain the US’ economic security.
By some estimates, 90 percent of leading-edge silicon is manufactured by TSMC. The vast majority of that comes from fabs in Taiwan, an island whose sovereignty is a controversial subject for its neighbor 80 miles to the west. US government officials have warned for years that China could exploit the world’s continued reliance on Taiwan.
However, achieving a 1:1 ratio of chip production to imports may be harder than the White House might think.
TSMC’s US build out won’t change the calculus much — at least not before Trump’s second term expires. Building a leading-edge wafer fab takes years. TSMC’s first Arizona foundry site was announced amid the 2020 election, and only this year began ramping up production.
It’s estimated that, when all is said and done, about 30 percent of TSMC’s 2nm and smaller fab capacity will eventually be centered in the US, but it’ll be years before that happens.
Intel could pick up some of the slack in the meantime. Its new Arizona fabs are already in production, with its first generation of chips based on Intel 18A, a 2nm-class process node. It certainly wouldn’t be surprising to see the White House drive potential foundry customers into Intel’s arms now that it’s a stakeholder in the company’s success.
The problem is it takes years and hundreds of millions of dollars to tape out a chip on a new process node. Companies already evaluating 18A or Intel’s forthcoming 14A process tech may be able to move a bit faster, but there are still a lot of ifs. Intel needs to have the capacity to take on new customers, and its fabs will need to achieve high enough yields, or a move could end up costing fab customers more than simply paying the tariffs.
Intel is currently in the process of clawing back products previously outsourced to TSMC, and as such it stands to benefit the most, or perhaps suffer the least, from the reported policy change.
Apple, Nvidia, and AMD have insulated themselves to some degree, announcing plans to manufacture chips at TSMC’s Fab 21 wafer plant in Arizona. To what extent, however, they haven’t said.
For everyone else who hasn’t already signed large-scale commitments with TSMC for domestic fab capacity, avoiding the semi-tariffs will be nearly impossible for the remainder of Trump’s second term. ®
