As President Trump addressed Congress last week, he veered off script to attack a sensitive topic, the CHIPS Act, a bipartisan law aimed at making the United States less reliant on Asia for semiconductors.
Republican lawmakers had sought and received reassurances over the past few months that the Trump administration would support the program Congress created. But halfway through Mr. Trump’s remarks, he called the law a “horrible, horrible thing.”
“You should get rid of the CHIP Act,” he told Speaker Mike Johnson as some lawmakers applauded.
The CHIPS program was one of the few things to unite much of Washington in recent years, as lawmakers on both sides of the aisle worked with private companies to draft a bill that would funnel $50 billion to rebuild the U.S. semiconductor industry, which makes the foundational technology used to power cars, computers and coffee makers. After President Joseph R. Biden, Jr. signed it into law in 2022, companies found sites in Arizona, New York and Ohio to construct new factories. The Commerce Department vetted those plans and began to dole out billions of dollars in grants.
Now, Mr. Trump is threatening to upend years of work. Chip company executives, worried that funding could be clawed back, are calling lawyers to ask what wiggle room the administration has to terminate signed contracts, said eight people familiar with the requests.
After the speech, Senator Todd Young, the Indiana Republican who championed CHIPS, said he reached out to the White House to seek clarity about Mr. Trump’s attack because the criticism was “in tension” with the administration’s previous support.
“If it needs to transform into a different model over a period of time, I’m certainly supportive of that,” Mr. Young said last week. “But let’s be clear, the CHIPS and Science Act, at least the chips portion, has mostly been implemented. It has been one of the greatest successes of our time.”
The United States pioneered the semiconductor industry, designing the first microchips and the processes for making them, allowing it to become an early tech leader. But in the 1980s, companies began outsourcing most production to Asia.
U.S. lawmakers began pushing to rebuild domestic chip production after the pandemic created a global chip shortage that forced some U.S. auto factories to shutter, resulting in the CHIPS Act.
But the Trump administration has already taken steps to whittle away at the program.
In late February, Michael Grimes, a senior official at the Department of Commerce and former investment banker at Morgan Stanley, conducted brief interviews with employees of the CHIPS Program Office, which oversees the grants.
In interactions some described as “demeaning,” Mr. Grimes asked employees to justify their intellect by providing test results from the SAT or an IQ test, said four people familiar with the evaluations. Some were asked to do math problems, like calculate the value of four to the fourth power or long division.
Last week, the Commerce Department laid off 40 of the CHIPS office employees, nearly a third of the entire team, these people said.
The administration has also begun discussing changes to projects that received chip-related subsidies, according to three people familiar with the internal conversations. The Biden administration gave preferential treatment for recipients that hired unionized construction workers and provided child care for employees, guidelines that could be changed, the people said.
The reviews and layoffs were previously reported by Reuters and CNBC.
On Wednesday, the day after Mr. Trump’s speech, the Semiconductor Industry Association organized a call with member companies, said three people familiar with the discussion. During the call, people chalked up Mr. Trump’s frustration with the law to personal animus with Mr. Biden.
Some said that Mr. Trump’s criticism could create challenges by drawing public attention to their projects, according to the people. But many also expressed confidence that their legal agreements with the Commerce Department couldn’t be changed.
The Semiconductor Industry Association declined to comment.
So far, the Commerce Department has signed contracts to grant more than $36 billion in federal subsidies under the CHIPS Act. Samsung, Intel, Micron, Taiwan Semiconductor Manufacturing Company, known as TSMC, and others in response have pledged to invest hundreds of billions of dollars in U.S. chip-making facilities.
Mr. Trump has proposed replacing those incentives with tariffs that increase the cost of making chips overseas. On Tuesday, he said that the threat of tariffs had compelled TSMC, the world’s biggest maker of advanced semiconductors, to increase its U.S. investment by $100 billion and double the number of plants it is building in Arizona, to six.
“We don’t have to give them money,” Mr. Trump said. “We just want to protect our businesses and our people, and they will come because they won’t have to pay tariffs if they build in America.”
It’s unclear how much of a factor tariffs played in TSMC’s plans. The company had already acquired land and drafted plans to expand its footprint in Arizona once it had the customers to support three additional plants, said three people familiar with the CHIPS Act. TSMC is investing earlier than previously planned, partly because customers like Apple and Nvidia committed to buying more U.S.-made chips, the people added.
TSMC and Intel declined to comment. Micron and Samsung didn’t respond to requests for comment.
Lawyers and industry executives have said that tariffs on chips themselves are not very effective because the United States imports few chips directly. Chips are typically sent directly to electronics factories, generally in Asia, where they are placed in laptops, cellphones and appliances before being imported into the United States.
Some in the chips industry have been formulating plans to try to convince Mr. Trump of the law’s value since the election, including at the industry’s annual gathering in San Jose, Calif., in November. The initial legislation was spurred partly by a request from officials during the first Trump administration that TSMC invest in the United States, which kick-started an effort from Congress to secure funding for the company.
That soon snowballed into a broader effort to fund the industry, as other companies and lawmakers wanted to participate.
“We need to go and make sure that our colleagues in Washington remember that, embrace that and continue to invest in our incredible industry,” said Deirdre Hanford, the chief executive of Natcast, a nonprofit created by CHIPS to oversee semiconductor technology development.
The risk of losing funding has caused some industry executives to complain that the government was too slow to provide subsidies in the first place. While the law went into place in August 2022, the Biden administration spent months carefully vetting each project. Most of its largest grants were finalized after the election.
“Is it perfect? No,” said Senator Mark Warner, the Virginia Democrat, during a Washington tech and policy conference last week. “But without it, there would not have been another fabrication facility built in America.”