How Donald Trump's 'America First' may have put brakes on the sector that was working to bring business back to the US
Even before the "America First" doctrine became a hallmark of the Trump administration's foreign policy, the
U.S. semiconductor industry
was actively working to bring manufacturing back home, fueled by government incentives and a strategic push to bolster domestic production. As reported by the Associated Press, the Greater Sacramento region stands as a prime example of this resurgence, where tech giants like Intel, AMD, Bosch, Samsung, and Micron are expanding operations, building upon Intel's decades-long presence. This growth is part of a nationwide trend, with billions of dollars invested in research, development, and manufacturing.
However, President Donald Trump's recent trade policies, including proposed tariffs and investigations into chip imports, are casting a shadow of uncertainty over this burgeoning industry.
What's hurting semiconductor companies in the US
"You're starting to see some of it now. Samsung announced a delay in the fabs in Texas," Mario Morales, an analyst with the International Data Corp., told the AP. "That facility was supposed to come online in 2024 now it's being delayed to 2028. I think some of these companies are delaying it because they now know that they're not going to likely get funding, or because of the uncertainty around the acts that we're seeing around the new trade policy."
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Despite the U.S. being a major producer of certain semiconductor chips, its global market share, measured by volume, has dwindled from 37% in 1990 to just 10% in 2022, according to the Semiconductor Industry Association. This reliance on imports, particularly from Taiwan and South Korea, prompted the passage of the
CHIPS and Science Act
in 2022, aiming to revitalize domestic manufacturing and reduce supply chain vulnerabilities.
Benefits of CHIPS Act undone
The CHIPS Act, championed by the previous Biden administration, has spurred significant investment, with projections indicating the U.S. will more than triple its semiconductor manufacturing capacity, the highest growth rate globally, according to a May 2024 report by the Semiconductor Industry Association and Boston Consulting Group.
Barry Broome, president of the Greater Sacramento Economic Council, told the AP that the pandemic underscored the risks of relying on offshore production. "It was 'abundantly clear that having these chip products offshore in Vietnam, Taiwan, China for cost savings had serious implications.'"
The region's established tech infrastructure and skilled workforce have attracted major investments, such as Bosch's $1.9 billion project to produce electric vehicle chips, creating up to 1,700 jobs.
Dinakar Munagala, cofounder of Sacramento-based AI startup Blaize, highlighted the increasing interest from defense and border security sectors in domestically produced chips. "We're built here," he said to the AP.
Trump Tariffs cause confusion, earn experts
The Trump administration views domestic chip production as a national security imperative, aiming to reduce dependence on foreign suppliers and mitigate risks associated with concentrated manufacturing. However, the fluidity of the administration's tariff policies is causing concern.
Alvin Nguyen, senior analyst at Forrester, told the AP that "the fluidity of the state of administration's tariffs will cause confusion about the impact on the supply chain 'due to the complexity of tracking where materials and manufactured goods are produced and assembled.'"
The uncertainty has already impacted industries, with video game companies like Nintendo adjusting prices in response to potential tariff increases. Broome expressed hope that the tariffs are a short-term measure to restructure global trade relationships, cautioning that prolonged uncertainty could stifle investment. "If the tariffs are used for leverage to get better agreements in the next two or three months, then we'll come back quickly, and will benefit from it," he told the AP. "If they're considered long-term policy, I think it'll really ice the capital markets from putting real money on the table."
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