President Donald Trump called for the repeal of the CHIPS Act in his State of the Union address on March 4, raising questions about the future of semiconductor investment in the United States. 

“The CHIPS Act decided massive subsidies, but they are not actually being used as budgeted, and it doesn’t mean anything. You should get rid of the CHIPS Act and use whatever’s left over to reduce debt,” Trump stated.

The CHIPS Act, passed in August 2022, allocated $58.7 billion to boost U.S. semiconductor production, with $28 billion dedicated to advanced memory and logic device manufacturing, $10 billion to mature-generation facilities, and $11 billion for R&D. 

Additionally, the act provided $16 billion in government financing and tax deductions for 25% of investment value. By the end of 2024, the U.S. government had approved $27 billion in assistance for Intel (NASDAQ:INTC), TSMC, Micron (NASDAQ:MU), Samsung (KS:005930), Hynix, and GlobalFoundries (NASDAQ:GFS).

In a note Wednesday, Jefferies said the semiconductor market could see a “setback of $2-3bn” if CHIPS Act subsidies are halted in 2025. 

However, the firm also pointed out that the medium-term growth outlook for semiconductors remains unchanged. “We retain our outlook over the medium term for the demand side, of continued expansion of the semiconductor market, separately from near-term macro impacts.”

Jefferies further highlighted that if U.S. semiconductor investments decline, other regions may see increased capital expenditures, particularly in Taiwan and Korea. 

The firm cautioned against drawing immediate conclusions, stating, “We advise against immediate conclusions at this point because of the potential difference in the initial message and actual outcome for policies under the Trump administration.”