Donald Trump pulled off a comeback to become President elect through his victory in the neck-and-neck competition with incumbent Vice President Kamala Harris in the 2024 US presidential election. The policies and stances of the candidates from the two parties during the campaign reflected fundamental ideological differences: the Republican Party embraces conservatism, supports low tax rates, and promotes capitalism and conservative economic policies, while the Democratic Party is built on American liberalism. These ideological differences, evident during Trump's first term as President and under the Biden administration, will further manifest into Trump's second term, particularly in the development of the U.S. semiconductor policy.

1. Trump’s First Term: reshoring of manufacturing and initiation of US-China chip war

The Trump administration ran with the slogan "Make America Great Again" and "Made in USA" in 2017, aiming to attract manufacturing back to the US. All acquisitions and investments by China were placed under strict scrutiny in order to slow down China's rise as an industrial power and to secure the US semiconductor supply chain. Republicans and Democrats began collaborating on chip legislation and offering subsidies and incentives to attract leading global semiconductor companies to establish facilities in the US. Anti-dumping measures, anti-subsidy investigations, Section 301 investigations, and tariffs were put in place to address issues such as technology outflow, investment plans, and trade deficits with China. Meanwhile, companies such as ZTE, Huawei, HiSilicon, and SMIC were added to the Entity List, and ASML was prohibited from exporting EUV (extreme ultraviolet) lithography machines to China to prevent their use in the manufacture of chips for military purposes and to protect US intellectual property.

2. Biden Administration: CHIPS and Science Act to strengthen supply chain resilience

The US is currently working to boost the supply chain of its domestic semiconductor industry with policy measures. The Biden administration launched a subsidy program for the chip industry shortly after it took office and established effective incentives for chip production through legislation. The CHIPS and Science Act was promulgated in August 2022, and the Department of Commerce has been spearheading efforts to create a semiconductor ecosystem and state-level industry clusters within the US. 

Over the two years since the US started offering of subsidies under the CHIPS and Science Act, preliminary memorandums of terms (PMTs) have been signed with 21 manufacturers, and the subsidies are about to be disbursed. Funds are mostly being allocated to heavyweight companies from the U.S., Taiwan and South Korea, including $8.5 billion to Intel, $6.6 billion to TSMC, $6.4 billion to Samsung, and $6.14 billion to Micron, with the aim of bringing advanced manufacturing processes back to the US. 

The CHIPS and Science Act provides a 25% tax credit for businesses constructing and installing chip facilities in the US. The Act includes a guardrail clause that prohibits subsidized entities from deploying or expanding semiconductor production, conducting joint research or technology licensing in China for 10 years. In October 2024, the US Department of the Treasury announced measures to restrict US companies from investing in advanced chip technology in China, Hong Kong, and Macau. The Biden administration has emphasized the concepts of democracy and human rights and taken a leading role in multilateral alliances and partnerships by working with allies and partner nations to restore US international engagement through initiatives such as Chip 4, US-Japan-Netherlands deep ultraviolet (DUV) lithography export controls to China, US-Japan-Australia-India semiconductor development partnerships, and US-India critical and emerging technology initiatives. 

3. Trump 2.0: Policy U-Turn and possible elimination of direct foreign subsidies

During the Biden administration and under the CHIPS and Science Act, the Department of Commerce signed direct subsidy contracts with 21 chip manufacturers, though funding hasn't been formally distributed, and the agreements are not legally binding. The new Trump administration may change course on the direct subsidies offered under the CHIPS and Science Act by prioritizing American companies. Hence, support in any form is expected to concentrate on US firms to benefit domestic manufacturing. Meanwhile, the corporate tax rate is anticipated to be reduced significantly from the current 21% to 15%. However, the Biden administration is currently rushing to complete subsidy appropriations, potentially prioritizing financial aid through subsidies and loans to cash-strapped Intel, so that it can meet the 18A process ramp-up schedule. It is worthy of attention that direct subsidies to foreign companies previously agreed may be scaled back, with stricter subsidy conditions, increased US investment requirements, and higher mix of advanced process nodes.

Recently, TSMC's fab in the US achieved significant yield breakthroughs, whilst Samsung's new fab in Texas has delayed the installation of ASML equipment. 

Under the new Trump administration, the US-China chip war and trade war are likely to normalize, with Trump raising import tariffs on Chinese goods to over 60%. Currently, China is the main driver of the global capacity expansion for mature nodes.  Aggressive trade actions against China will alleviate the price pressure from China on domestic mature node chip products.

During his Presidential election campaign, Trump opposed the awarding of direct subsidies under the CHIPS and Science Act. In particular, he did not support government subsidies going to foreign heavyweight companies and instead, considered imposing high tariffs on Taiwanese chip imports. This aligns with Republican policy statements and comments during the campaign. The change in the US chip policy in Trump's second term has been repeatedly discussed within the Taiwanese semiconductor industry during the election campaign. 

This will undoubtedly present a daunting challenge for Taiwan's semiconductor industry. Careful assessment of the current situation and early preparedness for future trends will be necessary to maintain a stable footing amid the coming waves of changes and to capture the development opportunities going forward.