The Trump administration's expected moves to cut back a key government scientific research agency could present another challenge for semiconductor and chip equipment companies and their stocks.

Robert Maire, an analyst at Semiconductor Advisors, said Wednesday reports from Bloomberg and Axios that the new administration plans to cut about 500 jobs at the National Institute of Standards and Technology could be the death knell for the CHIPS Act.

About NIST

NIST is a laboratory under the U.S. Department of Commerce that among its missions is to oversee and manage investment funds initiated by the Biden administration to support the U.S. semiconductor industry. The CHIPS Act includes about $39 billion in subsidies to build semiconductor factories in the United States, as well as tax credits for expensive manufacturing equipment.

"NIST personnel have confirmed that they expect layoffs soon, likely this week, and it sounds like the CHIPS Act will be a primary target," Maire said in a note to clients. "Without staff to manage the CHIPS Act program, the program will fail by default because there is no one to prove that companies have met its requirements, let alone write checks." Maire also noted that NIST's computer security, anti-hacking and artificial intelligence security programs also appear to be affected by the cuts. He has been uneasy about the future of the CHIPS Act, but he had hoped that companies building factories in states controlled by Republican lawmakers would not be affected by any possible spending cuts.

It is worth mentioning that new Commerce Secretary Howard Lutnick appears to support the CHIPS Act. At his confirmation hearing before senators last month, Lutnick described the CHIPS Act as an "excellent down payment" and promised to review it.

The two largest U.S. companies to receive CHIPS Act funding so far are Intel Corp. and Micron Technology Inc., both of which are building new manufacturing plants in the United States. Companies that make equipment used to make chips, such as Applied Materials Inc. and LAM Research, are also seen as beneficiaries of chip customers' increased investment to equip new facilities. However, Applied Materials was rejected when it applied for $4 billion in new research facility funds.

Earlier this week, President Donald Trump threatened to impose 25% tariffs on automobiles, pharmaceuticals and semiconductors, just after reports of expected layoffs at NIST were released. The tariffs are likely to be announced on April 2, while the comprehensive trade policy review is expected to end on April 1.

"We think the government has not fully considered all the consequences because 100% of AI chips are imported from Taiwan," Maire said, adding that a growing number of Intel chips are imported, while Advanced Micro Devices Inc.'s chips are 100% imported from other Taiwan Semiconductor Manufacturing Co. customers. And the vast majority of memory chips tend to be imported, too.

"More than 80% of chips are foreign-made," Maire noted.

Investors will be listening for comments from Nvidia Corp., which will discuss the potential impact of tariffs on its earnings call next week, which could hit chips and consumer electronics.

Chip Act

Previous report: Trump is ready to change the conditions of the US Chip Act

Earlier, people familiar with the matter told Reuters that the White House is seeking to renegotiate the US Chips and Science Act awards and has hinted at delaying some upcoming semiconductor grants.

The above-mentioned people and a third source said that the new administration is reviewing projects awarded under the 2022 bill, which aims to increase domestic semiconductor production in the United States through $39 billion in subsidies.

According to sources, Washington plans to renegotiate some agreements after evaluating and modifying existing requirements. It is not clear to what extent the modifications may be and how these modifications will affect the agreements that have been reached. It is not clear whether any action has been taken.

"The CHIPS Project Office told us that certain conditions in all current CHIPS direct funding agreements that are inconsistent with President Trump's executive orders and policies are under review," GlobalWafers spokesperson Leah Peng said in a statement to Reuters.

Taiwan's GlobalWafers said that Washington has not directly notified it of any changes in the conditions or terms of its awards. The company will receive a $406 million grant from the US government for projects in Texas and Missouri. Currently, the company can only receive subsidies after achieving specific milestones later in 2025.

Each awardee's agreement has different terms and milestones.

Four sources familiar with the discussions told Reuters that the White House has concerns about many provisions of the $39 billion CHIPS and SCIENCE Act industry subsidies.

These include additional clauses, including requirements added to contracts by President Biden's administration that recipients must use union labor to build factories and help provide affordable child care for factory workers.

The White House and the U.S. Commerce Department did not immediately respond to requests for comment.

The Semiconductor Industry Association, a trade group representing the chip industry, has begun asking its members how to improve the program.

But David Isaacs, the group's vice president for government affairs, said: "It is important that manufacturing incentives and research programs continue uninterrupted, and we stand ready to work with Commerce Secretary nominee (Howard) Lutnick and other members of the Trump administration to streamline the program's requirements and achieve our shared goal of strengthening U.S. leadership in chip technology."

Since taking office, Trump has issued a series of executive orders aimed at dismantling diversity, equity and inclusion programs in the federal government and the private sector.

One of the sources said the White House is also frustrated with companies that accept CHIPS Act subsidies and then announce large overseas expansion plans, including in China. The act allows some investments in China.

*Disclaimer: The content of the article is the author's personal opinion. Semiconductor Industry Insight reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Insight agrees with or supports this point of view. If you have any objections, please contact Semiconductor Industry Insight.

Source: Content compiled from marketwatch

View more at EASELINK