Will Trump's Victory Usher in a New Era for the US Chip Industry?

Will Trump's Victory Usher in a New Era for the US Chip Industry?Over the past five days, Bitcoin has surged over 15%, reaching a new all-time high. Along with Bitcoin, Elon Musk's net worth has also skyrocketed

Will Trump's Victory Usher in a New Era for the US Chip Industry?

Over the past five days, Bitcoin has surged over 15%, reaching a new all-time high. Along with Bitcoin, Elon Musk's net worth has also skyrocketed. As one of Trump's most "ardent" supporters, Tesla's stock price surged 39% in four trading days, increasing Musk's net worth by $70 billion. Since Trump's victory in the US presidential election, the S&P 500 and Dow Jones have both hit record highs. The S&P 500 index has broken through 6,000 points, and the Dow Jones has exceeded 44,000 points. Wilmington Trust's chief investment officer said that the S&P 500 index could climb to around 6,500 points in the next two months. The US stock market has gone from gloom to "jubilant" after the election. Dow Jones Market Data set a record on November 11th for the fastest time to reach the 1,000-point milestone since 1957.

Trump's ascension seems to have injected a shot of adrenaline into the US economy, but with Biden's term nearing its end, the once-grand "Chips and Science Act" has also entered its final countdown. Different chip companies have subtle differences in their attitudes towards the results of the US election.

Two Foundry Giants, "Cut-off" Loyalty

The world's largest wafer foundry, TSMC, responded to Trump's election with "our investment plans in the US remain unchanged," but didn't provide further details. TSMC hasn't offered much comment on the election results, but industry insiders revealed that TSMC had stopped exporting advanced process chips to mainland China from this week and is reviewing orders to ensure compliance with US regulations. This timing coincides with Trump's win, after he had previously stated, "The US subsidies to companies in Chinese Taipei are a bad idea because Chinese Taipei already dominates the chip industry, sacrificing the interests of American competitors." TSMC's intensified order review for mainland China during this period speaks volumes.

As one of the biggest recipients of subsidies under the US "Chips and Science Act," TSMC plans to invest approximately $65 billion in its Fab21 facility in Arizona, building wafer fabs in three phases. TSMC was originally expected to receive $6.6 billion in direct subsidies, $5 billion in loans, and a potential 25% investment tax from the US "Chips and Science Act". But with Biden's impending departure, TSMC is likely to face a "bait and switch" scenario.

Another non-US foundry, Samsung Electronics, has expressed its concerns about Trump's return to power more directly. Samsung Electronics has said it will implement targeted responses to the policies of Trump's second term in office. Since the "Chips and Science Act" subsidies have not yet been paid, Trump's second term could withdraw the subsidies. Given the high level of policy uncertainty, it is difficult to make large-scale investments rashly. As news of TSMC's "cut-off" spread, there were reports this week that Samsung's foundry business had also suspended 7nm and below advanced process foundry services for mainland China customers. Some analysts pointed out: "Although the US has not officially announced any restrictions, Samsung seems to have received a similar notification from the US Department of Commerce, like TSMC. Even if the US Department of Commerce has not sent a letter to Samsung, Samsung, out of 'risk avoidance,' would follow TSMC's actions."

US Big Three: Intel Congratulates, Nvidia and AMD Remain Silent

As another major recipient of subsidies under the "Chips and Science Act," Intel CEO Pat Gelsinger expressed his hope for collaboration with the Trump administration to advance the US's technological and manufacturing leadership in the world. During the campaign, Intel had repeatedly hinted at the lack of received subsidies from the "Chips and Science Act." Gelsinger publicly stated, "The 'Chips and Science Act' has been passed for over two years now. In that time, I've invested $30 billion in US manufacturing, and we've gotten zero back from the 'Chips and Science Act'. This has taken too long, we need to get this done." The "big thunderclap, small raindrops" of the "Chips and Science Act" may be wearing thin on Intel's patience. Clearly, Intel looks forward to new policies under the new president to make US chip manufacturing great again.

Unlike Intel, Nvidia and AMD CEOs have not expressed their views on Trump's victory. Jensen Huang, in response to Trump's first election, shared his thoughts: "My response is that we have to always remember to bring everyone in society forward together. This is the voice of the people. I am optimistic that the US government will continue to support diversity, have an inclusive attitude, and bring hope, helping us to remember that there are people in every part of the country who we need to help. I am very optimistic about the results of the election, independent of my own inclination towards a more liberal form of government. I am confident in the resilience of the government. We will find a way to transition and we will find a way forward."

Lisa Su's attitude towards Trump is almost impossible to find in public. This obvious avoidance speaks volumes about the two companies' "neutrality." Analysts believe that Trump's victory is a positive development for both companies. Unlike the Biden administration, which is inclined to institute stricter scrutiny of AI development (including signing executive orders and establishing new reporting rules for AI companies), Trump's approach seems to be geared towards reducing red tape and promoting deregulation. Trump is likely to take a business-friendly stance on AI federal regulation. Trump has said he wants to overturn Biden's executive order on AI, which included provisions for monitoring AI model training and output. This could alleviate compliance-related issues, accelerate innovation for tech companies and startups, and therefore boost demand for AI infrastructure components sold by Nvidia, AMD, and Micron. Additionally, as AI data centers consume massive amounts of energy, Trump's efforts to expand energy production and increase fossil fuel supply could improve electricity supply and pricing, which would be another indirect win for AI projects. Nvidia and AMD's stock prices have both risen over the past five days, with Nvidia setting a new all-time record of $3.6 trillion at its peak, with the two companies, riding the wave of artificial intelligence, quietly making a fortune.

The Last Days of the "Chips and Science Act"

The Biden administration is attempting to give the "Chips and Science Act" a graceful ending in its final two months. According to reports, the US government has intensified talks with companies such as Intel, TSMC, Samsung Electronics, and GlobalFoundries regarding agreements related to the "Chips and Science Act." The US Department of Commerce has allocated over 90% of the $39 billion in subsidies under the "Chips and Science Act of 2022," but only one binding agreement has been announced so far. It is understood that companies like TSMC and GlobalFoundries have concluded negotiations, and final funding allocation results are expected to be announced shortly. Intel, Samsung Electronics, and Micron Technology are still negotiating some substantive details of the contract. Biden's goal is to complete the Chips and Science Act agreements before the end of his term. According to publicly available information on the Chips and Science Act, the US Department of Commerce recently informed the congressional appropriations committee that at least three companies, including TSMC, are about to receive final subsidies under the "Chips and Science Act." TSMC, GlobalFoundries, and the US Department of Commerce have declined to comment.

Looking back since the "Chips and Science Act" was enacted in September 2022, the chip industry's attitude towards the act has shifted from anticipation to disappointment. Many individuals in the US chip sector have expressed the "Chips and Science Act" has had negative consequences. Applied Materials has been left out by the government. Applied Materials had planned to build a new research and development facility in Silicon Valley, California, at a cost of $4 billion, but the plan was derailed due to insufficient government funding. "We must not only build more domestic chip manufacturing capacity, we must also maintain and expand our leadership in fundamental technology research and development, because fundamental technology determines how future chips are manufactured."

Beyond the impact on businesses, the "Chips and Science Act's" massive budget has affected funding for US research institutions. The American Physical Society's statistics show that 11 institutions had their budgets cut, and one institution's budget remained flat. Budget cuts generally ranged from a few percentage points, but the largest cuts were to the National Science Foundation, with an annual budget reduction of 8.2%, and the Departmentof Defense's Basic Research, with a reduction of 8.9%.

From a global perspective, the "Chips and Science Act" has sparked a race among global governments to provide subsidies for the chip industry, with Europe, Japan, and South Korea successively launching their own chip industry subsidies and intensifying controls on semiconductor exports, directly impacting the smooth flow of semiconductor trade globalization. Ironically, in 2023, after the "Chips and Science Act" was enacted, TSMC topped the list of global semiconductor companies by sales, supplanting Intel, which had held the top spot in 2022.

The Story Continues

During Trump's first term,