Bit by Bit is a weekly column focusing on technical advances each and every week across multiple spaces. My name is Adam Conway, and I've been covering tech and following the cutting-edge for a decade. If there's something you're interested in and would like to see covered, you can reach out to me at adam@xda-developers.com.

For a long time now, companies have outsourced most chip production outside of the United States. The powerhouse that is TSMC manufactures its most advanced chips in Taiwan, but it has some fabrication facilities in China, Japan, and the United States, too. On top of that, Intel has production facilities in the United States, Ireland, and Israel. Cutting-edge facilities are those typically outside of the U.S, and the CHIPS Act was designed to provide $52.7 billion in aid to companies in order to entice them to build within the U.S. With a new presidency looming, though, the CHIPS Act might be in danger.

Why is the CHIPS Act important?

It's a lifeline to companies like Intel

Firstly, it's important to go over what the CHIPS Act actually is. It stands for Creating Helpful Incentives to Produce Semiconductors (CHIPS), and it's a U.S. federal initiative aimed at improving domestic semiconductor manufacturing, research, and development. It was passed in 2022 under U.S. President Joe Biden, providing more than $52 billion in federal funding to boost U.S. semiconductor production and counter global shortages at the same time.

Not only that, but it also serves the interests of the U.S. to entice companies to build their chips domestically. Given the political status of Taiwan, there's potential for chip supplies to be disrupted in the future. Plus, America has no control or say in their production. If chips were to be produced domestically, it would create jobs and bolster national security. According to an analysis by the Semiconductor Industry Association, the program has already extended “$33.7 billion in grant awards and up to $28.8 billion in loans to 20 companies across 32 projects in 20 states.” Its importance is two-fold because of that, and its status as a bipartisan bill has meant that both Democratic and Republican parties have got behind it.

More importantly, companies are starting to get antsy about the lack of payments. Intel CEO Pat Gelsinger, in an interview with Yahoo! Business, complained about the length of time that it was taking to receive the funding.

It's well over two years since the CHIPS Act passed. And over that period, I've invested $30 billion in US manufacturing and we've seen $0 from the CHIPS grants. This has taken too long. We need to get it finished.

Why the CHIPS Act is suddenly in danger

President-elect Donald J. Trump is set to be sworn in on January 20th, and he's not a fan of the Act

Following the election in which former President Donald J. Trump secured a second term, the future of the CHIPS Act has come under scrutiny. House Speaker Mike Johnson previously suggested that the GOP “probably will” repeal the law when questioned by reporters. However, he has since walked back that statement, clarifying that “the CHIPS Act is not on the agenda for repeal.”

Trump, meanwhile, has repeatedly indicated a preference for tariffs over subsidies as a stronger economic tool to achieve domestic production. On the Joe Rogan Experience podcast, Trump stated, “You know, Taiwan, they stole our chip business... and they want protection.” Later, he added, “We put up billions of dollars for rich companies to come in, borrow the money, and build chip companies here. They’re not going to give us the good companies anyway.” It remains unclear which companies he considers the “good companies,” especially given that TSMC—arguably the most crucial chip fabricator globally—is set to receive $6.6 billion in grants and an additional $5 billion in loans.

Industry experts have noted that tariffs alone would likely be insufficient to encourage companies to build fabrication facilities in the U.S. Since tariffs are paid by importers rather than exporters, companies like TSMC would not bear additional costs from tariffs. In contrast, establishing a fabrication facility in the U.S. requires substantial investment, and loans and subsidies can help offset these costs in ways that tariffs simply cannot.

Of course, this is reminiscent of Trump's first term, where he set out to repeal some of former President Barack Obama's policies, including the Affordable Care Act (colloquially referred to as Obamacare). Despite his efforts, which included signing an executive order within hours of taking office, a repeal never came to pass. The effort ultimately failed due to a bipartisan vote in Congress that supported the ACA’s continued existence. Instead, Trump spent much of his presidency chipping away at the law in various ways.

With that in mind, it's understandable why some may be worried about the future of the CHIPS Act. Trump has already demonstrated once before that he can and will repeal an act that was supported by both sides of the aisle, and his focus on tariffs rather than subsidies appears to be something that he won't budge on. However, Speaker Mike Johnson's statements give pause on whether it would truly be repealed or not. With votes still being counted, it's still unclear who in 2025 will control the U.S. House of Representatives, though Republicans have already won control of the Senate.

No matter what, the CHIPS Act is an important piece of legislation that is giving a lifeline to tech companies looking to manufacture in the U.S. With the Act having bipartisan support in its implementation and recent statements by Johnson, it may be the case that it will remain mostly intact next year, especially with the Biden administration starting to commit finances to companies now.