In the end, the dust of the most contentious, ruthless, and discordant US federal election settled, and Trump was declared to have won the 2024 US presidential election. So, what impact will Trump’s victory have on the semiconductor and even the technology industry? The semiconductor industry is not only an integral part of the market, but also an integral part of the global economy. Coupled with the continuous upgrading of artificial intelligence (AI) in almost all fields, semiconductor policy will have geopolitical significance. Trump and Harris’ stance on the US Chip Act has attracted widespread attention in the industry.

The Chip Act stems from Trump’s Sino-U.S. trade war

In 2022, the U.S. government passed the $53 billion "Chip Act" to increase support for the semiconductor industry. Since then, the U.S. government has issued a number of awards to companies that target specific parts of the supply chain, with the goal of bringing manufacturing back home and protecting the United States from geopolitical disruptions. Market analysis shows that the introduction of the "Chip Act" is inseparable from the Sino-US trade war. The Trump administration laid the foundation for the introduction of the "Chip Act", which was later passed during Biden's term. Analysts at MoorInsights&Strategy believe that,Trump has continuously criticized TSMC and accused it of taking away U.S. semiconductor business. This may be to encourage the company to increase investment in the United States and possibly promote the "Chip Act 2.0".

The industry generally believes that incentives such as the Chip Act are more beneficial to the U.S. chip manufacturing industry than comprehensive tariffs. Tariffs alone cannot stimulate domestic production in the United States, but will increase the burden on consumers and exacerbate trade imbalances. For example, a tax on all chips made in Taiwan would drive up the price of nearly all U.S. electronics, many of which are already subject to tariffs.

If the next U.S. administration expands tariffs, the ultimate cost to U.S. consumers and businesses will only increase. As the scale of chip production in mainland China expands, tariffs on Taiwanese chips will make U.S. products much more expensive than products from other regions.

The U.S. Semiconductor Industry Association (SIA) pointed out that the subsidies, loans and tax incentives of the "Chip Act" totaled more than 30 billion US dollars, significantly stimulating private investment in the U.S. chip manufacturing industry. SIA believes these measures are critical to strengthening the U.S. chip industry.

The two have completely different attitudes towards the Chip Act

If the Chip Act is successful, about 28% of the world's advanced chip supply will come from the United States by 2032, compared with 0% currently. So far, the U.S. Chip Program Office (CPO) has announced $33.7266 billion in grants and up to $28.8 billion in loans to 20 companies.

The Harris campaign predictably touted the CHIP Act's efforts to provide federal grants and subsidies and loans to eligible companies such as Intel, TSMC, Samsung and Micron.

However, there are preliminary signs that Trump is not so enthusiastic about the CHIP Act after taking office.First, Trump recently called the bill "terrible," arguing that the agreement wasted billions of dollars used to attract foreign companies to build chip companies in the United States. Trump advocates imposing tariffs to attract investment, believing that this can attract high-quality companies without spending any money. In addition, the Speaker of the US House of Representatives, Mike Johnson, was recently recorded saying that if the Republicans control Congress without restrictions and Trump wins the presidency, "we will probably" try to revoke the CHIP Act. Of course, Johnson quickly walked back those remarks, attributing his answer to mishearing the question and emphasizing that Republicans support chip manufacturing but not the Green New Deal. He believes that "simplification and improvement" of the CHIP Act is necessary. However, the episode does raise a red flag for the long-term sustainability of this policy measure.

In addition to his stance on the Chip Act, Trump's remarks about "Taiwan, China, taking away the U.S. chip business and implying that Taiwan, China needs to pay for U.S. protection" are also controversial in the industry. He said,After returning to the White House, tariffs will be imposed on Taiwanese chips, even though more than 90% of the world's advanced chips are supplied by TSMC.Trump said: "We invested billions of dollars and let wealthy companies come in to borrow money and build chip companies here." However, Trump's views are somewhat different from those of his vice presidential running mate JD Vance, who believes that Taiwan's semiconductor industry is vital to U.S. national interests. From an international relations perspective, TSMC's investment in advanced manufacturing facilities in the United States is in line with U.S. requirements. In addition, TSMC's willingness to invest in the United States also means higher costs, such as increased labor costs. This additional financial burden may be interpreted as a "protection fee."

The future direction of the "Chip Act" remains a mystery

Although Harris supports the "CHIP Act" and recognizes the value of the bill to domestic production and job creation in the United States, she has not yet clearly stated her position on tariffs or export restrictions affecting chips and electronic products. Observers expect she may continue much of the Biden administration's trade policies.

While Trump and Harris hold opposing views on the CHIP Act, their potential impact on future chip policy remains uncertain. Market analysts find it difficult to predict how the two candidates will affect chip and electronics regulations or incentives, noting that the competition between Trump and Harris on these issues remains a key but uncertain factor.

The fact that the CHIP Act supported the flow of more than $50 billion in subsidies to semiconductor-related businesses became well known and appeared to be reflected in market prices. But that doesn’t necessarily mean the deal is over, as execution takes time. The U.S. Department of Commerce had to assemble a team and logistics to manage the project. It was not until December 2023 that the U.S. Department of Commerce announced the first grant.

The important thing here is that even if the policy changes are known, where the funds will be deployed and when they will be deployed are unknown. For Joe Stockunas, president of SEMI Americas Chapter, the most worrying thing is that so far, only one company - Polar Semiconductor (which has a relatively small financing amount of $123 million) has signed a financing constraint contract under the Chip Act. Nearly two dozen other companies have announced contract awards and are waiting to sign contracts to lock in funds. Stockunas said, "It's actually hard for me to accept it now because we are really seeing good momentum this year." No matter which administration takes over from the Biden administration, delays will be his biggest concern.

In an industry plagued by boom-and-bust cycles, delays can derail things. Intel CEO Pat Gelsinger said last week that his company has not yet received any funding to help build new factories in Arizona and Ohio, criticizing the speed with which the funding has been forthcoming.

Still, he believes the initiative will continue no matter who wins the US presidential election. "The CHIP Act is a bipartisan bill with strong support from both parties," Kissinger said.

Expanding to the technology sector, Trump's victory in the US presidential election will have a far greater impact on the prospects of Chinese technology companies than Kamala Harris, with executives saying his unpredictable style may bring relief to the sanctions-hit technology industry or increase restrictions.

During his term as president from 2017 to 2021, Trump banned the export of high-tech products to China on the grounds of unfair trade practices and national security, thereby provoking a Sino-US trade war. However, Chinese tech executives say his combative attitude, coupled with his sudden imposition of sweeping tariffs, could unsettle U.S. allies and undermine any coordinated efforts.

"As the initiator of a comprehensive upgrade to contain China's technology, if Trump comes to power again... the domestic semiconductor industry may be further suppressed." Topsperity Securities, a Shanghai-based brokerage, wrote in August.

However, no matter who wins the election, we remain convinced that China's technology industry is more focused on the domestic market and more self-sufficient than when Trump or Biden came to power.