Lone Candle
Champion of Truth
Chip restrictions on China appear to work because China is obsessed with asking US administrations to lift the restrictions, and because the Chinese companies say the restrictions slow their progress.
https://www.youtube.com/watch?v=aU4DT9UxK00
Taiwanese chip manufacturer TSMC is building a subsidized plant in Arizona, but is having trouble dealing with: thousands of pages of regulation, unions who want Americans to get the jobs, cultural clashes, and homeowners who don’t want plants nearby.
This event shows that the US can be a tough place to do business. We should consider reform.
https://www.youtube.com/watch?v=m3rcPok9fb4
“In theory, the CHIPS Act provided a mechanism for the federal government to retract the grant and get all or part of its money back should Intel fail to meet its obligations. It’s not clear whether the federal government would have exercised its option to take the money back, but it was an option—until Trump stepped in.
As the company flailed, Trump met with its CEO, Lip-Bu Tan. Trump first called for him to resign. Then in August, the Trump administration announced that the federal government would just take partial ownership of Intel. Essentially, the U.S. government would purchase a roughly 10 percent stake in the chipmaker, partially nationalizing the company. And funds from CHIPS would be used to do it.
Trump bragged about the deal, saying he planned to “do more of them.” The company’s stock price rose on the news, suggesting that investors liked it. But that’s probably because it was a good deal for the company, at taxpayer expense.
According to public financial filings, the federal government would disburse the remaining funds, about $6 billion, while clearing any obligations for the company to actually complete work on new domestic semiconductor fabs.
In exchange, the federal government would gain partial ownership—as well as all the financial risks stockholders usually have when they invest in companies. Those risks will now be borne by taxpayers.
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Trump gave Intel a federal bailout, removing the company’s public obligations and accountability while loading more financial risk onto the public.”
https://reason.com/2025/11/29/chipping-away-at-chips/
“President Donald Trump is considering imposing a 100 percent tariff on semiconductors to incentivize chipmakers to invest in domestic manufacturing, a move that would make it harder to build out American chip fabrication.
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The Chamber of Commerce warns that a 1 percent increase in tariffs on chips and semiconductor manufacturing equipment will increase the construction costs of all announced domestic semiconductor fabrication plants (valued at $540 billion) by as much as $3.5 billion. A 100 percent rate increase, then, could increase construction costs for these projects by $350 billion. Moreover, “additional costs will reduce demand for end market products [and] reduce investments in semiconductor R&D,” diminishing American semiconductor dominance instead of enhancing it.
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Intel, “the only American company [that is] capable of producing leading-edge logic semiconductors,” warned that “Section 232 tariffs could increase U.S. manufacturing costs for essential materials and components.” The Semiconductor Industry Association, a trade association and lobbying group, said that “removing trade and other barriers to U.S. chips in overseas markets,” which account for 70 percent of revenue to the U.S. semiconductor industry, is key to making the expansion of domestic capacity economically viable. Right now, “the complete onshoring of all semiconductor supply chain elements is not feasible, much less in a short period of time,” because “supply chains have evolved over decades and cannot be rearranged overnight or even within a decade””
https://reason.com/2025/09/29/trumps-100-percent-chip-tariff-could-make-it-more-expensive-to-build-more-semiconductors-in-the-u-s/
“Natcast signed on 200 members — notably, Nvidia, Intel, Apple, Samsung, Google and AMD — to pursue breakthroughs in the foundational technology that powers virtually every modern asset from AI to defense systems. The group spent its year-and-a-half existence trying to set up and eventually run a national hub where that R&D would happen, along with programs to ease the semiconductor industry’s severe talent crunch.
Lutnick’s clawback produced deep uncertainty while companies, researchers and lawmakers scrambled to understand where it leaves over a dozen awardees, plus the remaining billions. Nearly $2 billion was promised to infrastructure, research and workforce projects in states like Arizona, New York, California and Texas.
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The Commerce head has focused its dealmaking heavily on chipmakers. His new “investment accelerator” was handed supervision of tens of billions of dollars in CHIPS subsidies and ordered to negotiate “much better deals than those of the previous administration.” The undermining of Natcast followed an agreement to grant the U.S. a 10 percent stake in Intel, when Lutnick redid the terms of its CHIPS award.
Seven people, including from three Capitol Hill offices, raised concerns with the possibility that renegotiations for this $7.4 billion may involve similar government equity stakes. People also questioned whether requirements to share revenue from research patents could be under consideration. Lutnick spoke about subjecting universities to the idea the day after he voided the Natcast contract.
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When the agency started soliciting proposals for R&D funding last week, it told applicants, as a condition of an award, they “may be required to issue to the Department equity, warrants, licenses to intellectual property, royalties or revenue sharing, or other such instruments to ensure a return on investment.” The guidelines do not mention the national hub, yet cite the law that established it.
LC: If we need these companies to produce important technology, then we don’t need special deals to help them. We should help them because it is good for the country. The technology will produce a better economy and therefore more normal tax revenue. If we want these companies to pay us back directly, just make sure they are paying their normal taxes.
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“They decided to burn two years of delay to try to create their own thing,” said a former Trump official, who, like several others for this report, was granted anonymity to discuss a sensitive topic. “While Natcast was not a Republican initiative and wasn’t how we wanted it go, I think it was better than burning down the whole system and starting over again.”
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“The companies are scared,” said a person familiar with the industry dynamics. “Companies want CHIPS funding, and they’re very afraid that if they speak out, they’ll lose it. No one wants to come into the crosshairs of the administration.”
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“There’s just a feeling of, for many of us, a year’s work going down the tubes, taxpayer dollars being flushed down the toilet,” said one person closely associated with Natcast.”
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An industry lobbyist said, “those who stand to lose the most in this process will be start-ups and research centers that were at the cutting edge of innovation.””
https://www.politico.com/news/2025/09/30/lutnick-natcast-chips-biden-00576779?nid=0000014f-1646-d88f-a1cf-5f46b7bd0000&nname=playbook&nrid=00000166-4638-d3a5-abf6-5e389b250000
“The Trump administration is seeking a 10 percent stake in Intel, Bloomberg reported this week, which would involve converting some or all of the company’s CHIPS Act grants into equity in the company. The exact terms of the deal remain unclear”
https://reason.com/2025/08/19/trumps-plans-for-intel-take-a-page-from-bernie-sanders-playbook/
“Nvidia, which makes up 92 percent of the global GPU market, and Advanced Micro Devices (AMD), which has the remaining 8 percent, have reached a deal with the Trump administration. They’ll get export licenses for the sale of certain chips to China in exchange for 15 percent of the revenues generated by the sales, reports the Financial Times.
“No US company has ever agreed to pay a portion of their revenues to obtain export licences,” the paper notes.
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The new agreement is not only unusual—it could be illegal, too. The Constitution states in no uncertain terms, “No Tax or Duty shall be laid on Articles exported from any State.” Yet this is what the Trump administration is effectively doing by conditioning permission to export these products on the forfeiture of 15 percent of sales revenue. Padilla appears to agree, telling the Post that “this arrangement seems like bribery or blackmail, or both.
Even if the deal brokered between the chipmakers and the federal government were legal, it would still be uneconomical. The revenue—hundreds of millions of dollars—will be directed to a Treasury Department slush fund that will allocate it arbitrarily. Nvidia and AMD have a stronger incentive, more information, and a better track record with investing dollars in a manner that yields a high return on investment.
U.S. export controls have not stopped China from developing AI, but they have denied American GPU firms access to much-needed revenue. Imposing this constitutionally dubious 15 percent tax is yet another example of unnecessary interference with the private sector.”
https://reason.com/2025/08/11/u-s-revenue-grab-on-chip-exports-raises-legal-economic-alarms/
Under Biden, Nvidia couldn’t sell China their best chips. Trump came and banned the fourth best chip, which Biden allowed. Trump later reversed and allowed those chips thanks to: lobbying, China blocking the U.S. from rare earths, and accepting a strategy that getting China to use U.S. chips is better than forcing China to potentially be really innovative and make their own.
https://www.youtube.com/watch?v=k-_bykJa0Fc
“DeepSeek also claims to have needed only about 2,000 specialized chips from Nvidia to train V3, compared to the 16,000 or more required to train leading models, according to the New York Times. These unverified claims are leading developers and investors to question the compute-intensive approach favored by the world’s leading AI companies. And if true, it means that DeepSeek engineers had to get creative in the face of trade restrictions meant to ensure US domination of AI.”
https://www.theverge.com/2025/1/27/24352801/deepseek-ai-chatbot-chatgpt-ios-app-store
“China banned the export of gallium, germanium, antimony, and industrial diamonds to the U.S., in response to U.S. trade and investment restrictions on Chinese technology companies. Though tit-for-tat tariffs occasionally lead to bilateral trade agreements, protectionism is more frequently a response in kind. China’s rare materials ban is the latest such response in the ongoing U.S.–China semiconductor trade war.”
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“The technological trade war reduces the productive and military capacity of both countries, not just China. Technonationalism harms American and Chinese consumers, hinders economic growth, reduces cross-cultural cooperation, and makes aggression more attractive.”
https://reason.com/2024/12/04/china-goes-tit-for-tat-over-u-s-chip-bans/