The Trump administration is expected to continue the semiconductor support law (Chips Act) implemented by the Biden administration. Domestic corporations, including Samsung Electronics and SK hynix, have promised investments in the U.S. under this law and are closely monitoring the movements of the next U.S. administration.
◇ Current and next Secretary of Commerce meeting shows intention to continue implementation
Bloomberg News reported on the 18th that Howard Rutenik, the nominee for Secretary of Commerce under the Trump administration, expressed a desire to continue the semiconductor support law. Gina Raimondo, the Secretary of Commerce who led the semiconductor support law during the Biden administration, recently mentioned in a staff meeting that Rutenik indicated he would dedicate himself to this policy and maintain its current direction.
The semiconductor support law, enacted in August 2022, is a key legislative achievement of the Biden administration, offering a total of $52.7 billion (about 76.8 trillion won) over five years, including $39 billion (about 56.8 trillion won) in production subsidies and $13.2 billion (about 19.2 trillion won) in research and development support for semiconductor corporations investing in the U.S. This legislation was created in response to the perception of a crisis due to the lack of advanced chip manufacturing plants in the U.S. and to counter China's rapid rise in the semiconductor sector.
Major global semiconductor corporations, including Samsung Electronics, SK hynix, and Taiwan's TSMC, have agreed to receive subsidies amounting to 5% to 15% of their investment in exchange for building factories in the U.S. Currently, more than 85% of the budget for the semiconductor support law's subsidies has been finalized, and the total amount that corporations plan to invest through this program is expected to reach $400 billion (about 582.4 trillion won).
However, the semiconductor industry has expressed concerns that the Trump administration may likely bring changes to the semiconductor support law. Previously, Trump referred to the current semiconductor law as "very inadequate" and stated, "We need to impose high tariffs so that they come (to the U.S.) and set up semiconductor plants at their own expense." Vivek Ramaswamy, appointed as a co-head of the Department of Government Efficiency (DOGE) under the Trump administration, also threatened to conduct audits on the subsidies that were confirmed during the latter part of the Biden administration.
◇ "Trump could cut subsidies immediately if corporations do not fulfill plans"
The current Department of Commerce holds the position that "the finalized support contracts cannot be arbitrarily changed without congressional approval." The bipartisan support for the semiconductor support law in the U.S. Congress also underpins the sustainability of the policy. However, corporations are considering the possibility of the Trump administration interpreting the law differently. Even if the final contract for the semiconductor support law is signed, the actual disbursement of subsidies can only take place once the indicators established in agreements between the Department of Commerce and individual companies are met. Consequently, if corporations violate even minor conditions during this process, it is predicted that the Trump administration may move to recover the subsidies.
Thus, the Trump administration is largely expected to impose more stringent criteria on the performance indicators of corporations rather than simply continuing the semiconductor support law. Major beneficiaries of subsidies, like Intel and Samsung Electronics, that are experiencing business downturns could see existing final contracts altered if they fail to follow through with their investment plans. Samsung Electronics has already reduced its investment scale in Texas, resulting in the final confirmed subsidy being cut by 26% compared to the initial memorandum of understanding.
Kim Hyuk-jung, a researcher specializing in North American economy at the Korea Institute for International Economic Policy, noted, "It is virtually difficult for the Trump administration to selectively cancel subsidies for some foreign corporations that have finalized contracts in the U.S., but the likelihood of subsidies being cut significantly rises if corporations fail to adhere to existing plans." Mike Schmidt, director of the Semiconductor Program Office (CPO) at the Department of Commerce, which has been implementing the semiconductor law during the Biden administration, also acknowledged in a Bloomberg interview that some semiconductor law participating corporations might change their plans after signing final contracts, stating, "The program will evolve to adapt to those changes."
Taiwan's TSMC, which is planning a $65 billion (about 94.4 trillion won) investment in the U.S., anticipates that subsidies will be issued even under the Trump administration. Wendel Hsu, TSMC's Chief Financial Officer (CFO), stated in an interview with CNBC on the 19th, "We already received the first subsidy of $1.5 billion (about 2.2 trillion won) in the fourth quarter of last year, and we plan to have our second factory operational from 2028 as scheduled," adding, "We expect to continue receiving semiconductor subsidies even if the U.S. government changes."