chip wars: will us semiconductor reindustrialization stall amid political divide?
Washington, Wednesday, 9 July 2025.
the us aims to revive its semiconductor industry and reduce reliance on asian imports. bipartisan support exists. however, republican and democrat strategies diverge. a trump administration favors tariffs and reduced spending. this contrasts with biden’s subsidies through the chips act. tsmc founder morris chang warned that us efforts to ramp up chip production may prove a very expensive exercise in futility. the conflicting approaches create uncertainty for nvidia, tsmc, and asml, potentially impacting investment and stock performance. policy shifts could influence market access and manufacturing costs.
tariff threats and market anxiety
Donald trump’s renewed threat of imposing tariffs on imported chips has triggered anxiety in the global semiconductor supply chain [3]. the exact tariff rates and scope remain undisclosed, but the market fears potential disruptions, especially if key east asian chip exporters are targeted [3]. this could substantially increase the prices of ai servers, smartphones, and various electronic devices [3]. asus ceo hsu hsien-yue acknowledged the uncertainty, stating, wait and see, trump always exceeds expectations [3].
chips act and the ‘big and beautiful’ plan
the us senate passed the ‘big and beautiful act,’ enhancing incentives for semiconductor manufacturing [2]. this act complements the chips and science act by increasing tax benefits for companies establishing factories in the us [2]. specifically, the tax credit for semiconductor manufacturers building new plants in the us has increased from 25% to 35% [2]. this aims to encourage domestic ai technology production [2]. however, the act has been described as a short-term stimulus that could potentially undermine long-term growth [4].
taiwan’s perspective: carrot and stick
the ‘big and beautiful act’ is viewed as a ‘carrot’ for taiwanese semiconductor companies, but the potential for subsequent ‘stick’ policies like chip tariffs remains a concern [2]. tsmc has suggested investment incentives and reduced regulatory barriers to enhance us competitiveness [2]. taiwan semiconductor association and other international firms have voiced concerns over potential tariffs or trade restrictions, emphasizing the interconnectedness of the global tech industry [2]. on april 2, 2025, taiwan already faced a 32% tariff on exports to the us [1].
domestic manufacturing challenges
despite incentives, building and operating chip fabs in the us remains 30% to 50% more expensive than in asia [1]. chips produced at tsmc’s arizona fab (fab 21) cost 10% to 30% more than those made in taiwan [1]. tsmc delayed mass production at fab 21 from 2024 to 2025, and the second module from 2026 to 2027–2028 [1]. similarly, intel postponed its ohio fab launch to 2030 [1]. morris chang, tsmc’s founder, has expressed skepticism, calling america’s efforts a potentially very expensive exercise in futility [1].
market reactions and economic implications
concerns over potential tariffs and geopolitical tensions have led to market volatility [3]. the nasdaq has experienced downturns due to tech sector weakness, while the dow jones showed resilience, indicating a shift in investment [3]. analysts suggest that trump’s policies, including extending tax cuts and incentivizing manufacturing, aim to stimulate consumer spending and business expansion [4]. however, these measures may lead to increased government debt and long-term economic vulnerabilities [4]. the us government has already raised its debt ceiling by $5 trillion to avoid a potential default in august 2025 [4].