Reported cuts at NIST imperil semiconductor reshoring plans in the US

Proposed cuts at a key US government agency will likely mean the demise of CHIPS Act funding, which could effectively end the program and undermine efforts to reshore semiconductor manufacturing and research to the US.

Axios and Bloomberg on Tuesday reported that the National Institute of Standards and Technology (NIST) plans to cut 497 jobs this week. NIST, a non-regulatory agency within the US Department of Commerce (DoC), helps drive innovation and industrial competitiveness and oversees the CHIPS for America program.

Robert Maire, president of consulting firm Semiconductor Advisors, wrote in a blog post that the plan to cut NIST staff isn’t “bluff or negotiation tactic.” Instead, the layoffs signal a complete shift in direction under US President Donald J. Trump, he said.

“Trump made it clear over the last few days that he will institute 25% tariffs on imported semiconductor devices, so [it’s] obvious that strategy is shifting from incentivizing US chip production to penalizing imports instead,” Maire said. “This also lowers the likelihood of TSMC taking over Intel manufacturing, as giving top US chip production to Taiwan contradicts the new strategy.”

The Trump Administration, Maire said, hasn’t fully considered the impact of the cuts, since “100%” of AI chips, most Intel chips, all AMD chips, TSMC customers’ chips, and more than 80% of memory chips are imported — with the majority of them outside the US.

“Obviously chip manufacturing companies will slow spending on programs they previously thought they were getting CHIPS Act funding for, if not cancel those projects outright,” Maire said. “If I were running a chip company, I would not count on CHIPS Act funding — even if I had a signed contract, as its clearly not worth the paper it’s written on if NIST is eviscerated.”

Industry analysts have agreed in the past that tariffs on imports will act as a penalty on the industry, while the CHIPS Act — hallmark legislation passed three years ago under then-President Joseph R. Biden Jr. — acts an incentive.

Jack Gold, principal analyst with tech industry research firm J. Gold Associates, has called Trump’s plan to enact tariffs on oversea chip makers is simply “wrong.” Funds already granted under the CHIPS Act should be safe if transferred, but with NIST staff cuts, the program could stall without oversight, he said.

“Ending it would be a mistake,” Gold said, arguing that incentives work better than tariffs for bringing chip manufacturing back to the US. If funding is pulled, companies like Intel might halt their projects, as they likely can’t replace the lost funding, he added.

“I don’t know how the companies (Intel and others) would replace the funding if it gets pulled,” Gold said. “In fact, I think it’s unlikely and the chip guys would just shutter whatever they are building, at least for the near term.”

The issue goes beyond CHIPS funding, Gold added, saying program cuts will hurt local communities expecting new facilities that would create jobs, pay taxes, and boost the economy. Areas such as Ohio, where projects were planned, “will miss out,” he said. And, local politicians in states expecing the grant monies, including New York, Ohio, Texas, and Arizona, are likely unhappy, he said.

“As for why Trump and company would do this, I think it’s just a short sighted view of, ‘Let’s cut all spending, without regard for what that spending ultimately means.’ As I said, you can’t accomplish bringing back manufacturing to the US simply by penalizing with tariffs. It won’t work,” Gold said. “Besides, it takes three to four years to build out a new fab, so imagine that amount of tariffs going into our products. What doesn’t have a chip in it these days? We will all be paying more for things.”

The CHIPS Act was passed overwhelmingly in 2022 by both houses of Congress to address computer chip supply chain shortages that surfaced during the COVID-19 pandemic. The legislation provided the Commerce Department with $52.7 billion for a suite of programs to “revitalize” the US position in semiconductor research, development, and manufacturing.

To date, the DoC has allocated, but not dispensed, about $32 billion in funding among chipmakers, including Intel, Samsung, Micron, TSMC, and Texas Instruments, all of whom have unveiled plans for a number of new US chip fabrication plants. In return, those chip designers and makers have pledged about $300 billion in current and future projects in the US, according to the White House under Biden.

The CHIPS Act has spurred $450 billion in private investment across 28 states, creating 58,000 jobs, according to the Semiconductory Industry Association. 

With the CHIPS Act spurring them on, the likes of Qualcomm, in partnership with GlobalFoundries, also said it would invest $4.2 billion to double chip production in its Malta, NY, facility.

Despite widespread bipartisan backing, some members of Congress expressed concerns about certain provisions, such as the level of government subsidies or the potential for the bill to benefit only a few large tech companies. Still, the majority of both Democrats and Republicans recognized the strategic importance of boosting semiconductor production on US soil.

In addition to Trump’s opposition, House Speaker Mike Johnson said in 2024 that Republicans would likely repeal the CHIPS Act. Johnson, who voted against the measure, later walked his comments back, saying he would like to “streamline” it, according to The Associated Press.

Source:: Computer World