us commerce reevaluation of semiconductor subsidies could shake industry
Washington, D.C., Friday, 31 January 2025.
The U.S. Department of Commerce is weighing changes to existing semiconductor and battery subsidies under the Chips and Science Act. This move could alter the landscape of domestic semiconductor policies and market dynamics. Companies such as TSMC may face significant impacts across the supply chain. The new Commerce Secretary appointee, Howard Lutnick, expressed reservations about adhering to agreements he has yet to review, signaling potential major shifts in funding strategies. This reevaluation is part of broader efforts to reassess trade policies, influencing global relations and investment strategies, particularly involving South Korean companies. The current $52.7 billion in subsidies, supporting entities like Samsung and SK Hynix, could see adjustments. These developments follow Trump’s administration’s shift towards demanding more domestic manufacturing and reducing business taxes, further increasing uncertainty for foreign investors in the U.S. semiconductor sector.
Market implications of subsidy review
Howard Lutnick’s stance on the $52.7 billion semiconductor subsidy program has created immediate market uncertainty [1][3]. The Commerce Secretary nominee’s hesitation to provide unconditional support for existing agreements has particularly affected companies like Intel and TSMC [3]. Samsung Electronics, which secured a potential $4.745 billion in direct subsidies, and SK Hynix, with its $458 million allocation, now face increased investment uncertainty [1].
Policy shift impact on foreign investments
The new administration’s approach signals a fundamental shift from subsidies to tax reduction strategies [1]. This policy reorientation affects not only semiconductor manufacturers but extends to the electric vehicle sector, where the administration has indicated plans to end commercial EV lease subsidies [1]. The uncertainty has broader implications for foreign direct investment, as companies must now reassess their U.S. expansion strategies [1].
Trade relations and manufacturing pressure
The reevaluation forms part of a larger ‘America First’ trade strategy that could impact relations with key allies [1]. The administration views current trade arrangements with allies, including South Korea, Japan, and European partners, as disadvantageous to U.S. interests [1]. This stance includes applying pressure on foreign companies to increase domestic production and employment, potentially through tariff adjustments rather than direct subsidies [1].