The chip on Donald Trump’s shoulder: why he despises Biden’s Chips Act

US President called bipartisan semiconductor law a ‘horrible, horrible thing’

In his speech before a joint session of Congress, US President Donald Trump asked lawmakers to repeal the Chips Act that was passed in 2022. AP

US President Donald Trump, during his first address to Congress since returning to the White House, asked legislators to repeal the Chips Act, a multibillion-dollar bipartisan bill aimed at boosting semiconductor production.

“Your Chips Act is a horrible, horrible thing,” he told Republicans and Democrats during the Tuesday night address, watched by millions around the world.

“We give hundreds of billions of dollars, and it doesn't mean a thing. They take our money and they don't spend it.”

Donald Trump calls for US to scrap Chips Act

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The 2022 Chips Act was seen as a rare moment of bipartisan unity that was signed into law by president Joe Biden, as his administration sought to bolster the economy while also attempting to counter China and ensure that the US maintains its competitiveness against Beijing in the race to dominate artificial intelligence.

More specifically, it provided $52.7 billion for semiconductor research, development, manufacturing and workplace development, benefiting companies such as Intel, Taiwan Semiconductor Manufacturing Company, Samsung and Micron Technology.

Mr Trump appeared to simply want to dismiss one of Mr Biden's accomplishments, as he did several times in his speech, but some experts say there are fundamental governing approaches fuelling his disdain for the Chips Act.

“President Trump believes in negative incentives,” Peter Yacobucci, a political science professor at Buffalo State University, told The National. “For him, the way you get people or businesses to do what you want is you make it very uncomfortable for them … and, by the way, this is exactly how he wants Ukrainian aid to play out.”

Tension with China is prompting the US to seek technology policies to maintain a lead in the burgeoning artificial intelligence sector. Getty Images

The Chips Act, Prof Yacobucci said, works on positive incentives – offering a carrot in the hopes that it will reduce the cost to businesses and banking on the idea that businesses will make investment decisions accordingly.

“Many, including myself, have argued that these positive incentives are little more than corporate welfare that drains funds from real pressing societal needs. That comes through in Trump's comments,” he said.

Prof Yacobucci added that there is an interesting twist, however, to Mr Trump's demands that the Chips Act be repealed.

There are similar legislative policies that provide billions in subsidies to some of Mr Trump's most loyal and enthusiastic allies – such as Tesla's Elon Musk – which have given a major boost to government investments via taxpayer dollars.

“Mr Trump may rail against electric car incentives but Tesla as a car company would not exist without them,” Prof Yacobucci said.

Intel and other semiconductor companies were major beneficiaries of the Chips Act. Reuters

Despite his speech being routinely interrupted by enthusiastic applause from Republicans, the reaction to Mr Trump's demand that Congress repeal the Chips Act was more subdued.

Prof Yacobucci said it's not necessarily a surprise that his fiery request to repeal the Chips Act was met with a tepid response.

“I would expect that any dramatic cut in Chips support is dead on arrival in Congress,” he said. “Republicans stand for one thing primarily: funnelling money to their donor class.”

Right before he bashed the Chips Act, Mr Trump boasted of his recently announced deal with TSMC, with the chip maker pledging to invest at least $100 billion to bolster manufacturing and research in the US.

“And we're not giving them any money,” he said, contrasting it with the Chips Act. “They will come because they won’t have to pay tariffs if they build in America. So, it's very amazing.”

The Trump administration's announcement on Monday of the TSMC deal came days after Apple pledged to invest at least $500 billion in the US over the next four years, although contrary to claims made in Mr Trump's congressional speech, Apple never mentioned the President when it announced its investment plans.

President Donald Trump asked lawmakers to repeal the Chips Act during a speech before a joint session of Congress. AP

There remains much debate as to how much of Apple's announcement was already planned before Mr Trump returned to the White House.

All these recent moves, however, are taking place against the backdrop of increased technology company tension and geopolitical jockeying for AI supremacy.

“They'll be building their plants here instead of in China,” Mr Trump claimed, seemingly referring to Apple, TSMC and other technology companies.