Leading chipmakers building new fabs in the U.S. warned the administration of U.S. President Donald Trump against levying new tariffs potentially halting a surge in construction that’s driving a return of the domestic industry and weakening American tech leadership.

Chipmakers like TSMC, Intel and Micron in May publicly replied to a U.S. Department of Commerce inquiry on the national-security impact of imports of chips and semiconductor manufacturing equipment (SME) and their derivative products. The U.S. initiated the investigation under Section 232 of the Trade Expansion Act of 1962.

While Trump has publicly said he expects tariffs to attract more manufacturing investment in the U.S., chipmakers and industry analysts urged more cautious steps because the American chip industry is still decades away from being self-sufficient.

“Imposing tariffs on SME imports will result in higher project costs and could delay progress or in some instances endanger the commercial viability of many announced projects and those still under consideration,” TSMC said in its response. “Many of the imported SME and semiconductor materials are not currently available in the U.S., whether in terms of quality or quantity.”

ASML of the Netherlands, for example, is the sole supplier of EUV lithography tools that are indispensable for production of AI chips. One ASML High-NA Twinscan EXE EUV tool costs about $380 million. High U.S. tariffs on ASML equipment would substantially increase production costs in America.

Big boost

Multi-billion dollar projects in the U.S. are at stake.

Shortly after Trump took office in March this year, Taiwan’s TSMC added $100 billion to its investment in the U.S., the largest single foreign direct investment in U.S. history, helping to start domestic production of AI chips.

U.S.-based Micron, which plans to invest $140 billion over the next 20 years to return production to the U.S. from Asia, said tariffs could make domestic fabs less competitive or possibly commercially infeasible compared with those outside the U.S.

Currently, only 2% of the world’s memory production is in the U.S. — all made by Micron. The company expects that share to increase to 12%, allowing Micron to make 40% of its DRAM chips in America.

The chipmakers are asking for more incentives and fewer restrictions from the U.S. government.

“To allow investments such as TSMC Arizona to proceed expeditiously, the Administration should exempt TSMC Arizona and other companies that have already committed to semiconductor manufacturing projects in the U.S. from tariffs or other import restrictions,” TSMC said.

Even though TSMC has achieved a yield in Arizona that is comparable to Taiwan at the 4-nanometer node, wafer costs are still 20% to 25% higher in Arizona than Taiwan,” according to International Business Strategies CEO Handel Jones, a chip-industry veteran.

“Customers are not willing to pay 20%-25% more,” he said.

Even so, in April, AI chip designers Nvidia and AMD started production at TSMC Arizona to hedge against potential tariffs on imported chips.

Other chipmakers expanding in the U.S like Intel and Samsung in response to the U.S. CHIPS Act have slowed fab projects as their business sours.

“Insufficiently targeted tariffs could unintentionally undermine the Administration’s goals of building more resilient domestic manufacturing, increasing U.S. semiconductor manufacturing jobs, and securing America’s AI dominance,” Micron said in its response. “In particular, tariffs that increase costs on key inputs, particularly SME, that are either not available in the U.S. at all or in insufficient quantities to meet demand, risk significantly harming the semiconductor manufacturing industry in the U.S.”

U.S. tariffs and the nation’s trade war with China threaten to slow global semiconductor sales growth to $970 billion from an earlier forecast of $1.2 trillion in 2030, Jones said.

“There is the need for a stable economic environment to make the commitment to facility locations and other decisions,” Jones told EE Times. “The almost daily changes in tariffs and trade issues are highly destabilizing to the semiconductor industry.”

Chipmaking equipment

Imported SME and materials include critical components such as lithography and process monitoring equipment, as well as subcomponents, parts, and accessories necessary for ongoing operations, Intel said in its statement. Countries like Japan, Korea, Singapore, Germany and the Netherlands are pivotal in supplying these “indispensable” resources, the top U.S. chipmaker added.

“To facilitate U.S. manufacturing operations that safeguard national and economic security, it is crucial to exempt these manufacturing components from restrictive tariffs and regulations,” Intel said. “While Intel is committed to building semiconductors in the U.S., fully localizing every element of the supply chain is economically unfeasible without significant cost increases and production delays. These challenges are exacerbated by tariffs that elevate input costs, placing American manufacturers at a disadvantage compared to international competitors.”

Building a facility in the U.S. costs 35-45% more than the same operation in Asia, Micron said. Increases in construction costs in the last couple of years have further widened that gap, the company added.

U.S. export controls

Chipmakers and designers also warned that expanded controls on U.S. exports of chips may harm the American industry.

AI chip designer Grok urged the Trump Administration to support the U.S. AI chip industry by simplifying export controls.

“The Administration should modify the interim rule published on January 15, 2025 entitled Framework for Artificial Intelligence Diffusion, the so-called ‘AI Diffusion Rule,’” Grok said. “As currently drafted, the AI Diffusion Rule places substantial burdens on U.S. AI chip manufacturers’ ability to export their technologies, which is particularly harmful to new U.S. market entrants in the AI chip sector like Groq.”

Potential Section 232 actions could result in closed foreign markets, retaliation or decreased demand for products of U.S. companies, putting the U.S. position as a global technology leader “in great jeopardy,” smartphone chip designer Qualcomm said. In addition to its reliance on overseas markets, Qualcomm will depend on Asian suppliers for years.

“Qualcomm must continue to rely on foreign fabs for a large portion of its production, including fabs in Taiwan and South Korea,” the company said.

Tariffs on semiconductors in the short term – whether on individual chips or those built into another product – could harm U.S. chip designers without creating proportional economic benefit to the U.S. or its workers, Qualcomm added.

“Qualcomm must continue to have access to the foreign markets in which its products are sold,” the company said. “The semiconductor industry, and the AI revolution it is fueling, is currently supported by an intricately interdependent and globalized supply chain ecosystem, where even minor disruptions can give an immeasurable technological edge to our foreign competitors. Loss of technological leadership may be further compounded if foreign countries were to respond to increased tariffs by working together to eliminate U.S. content from their products.”

More incentives urged

If the Administration decides to implement further measures to encourage onshoring of chip production in the interest of U.S. national security, TSMC encouraged pro-growth actions. “Investment incentives and further reductions to regulatory impediments that facilitate the speedy construction of new production facilities would be more constructive towards advancing the Administration’s national security objectives than import restrictions,” TSMC said. “The Administration should pursue extension of the advanced manufacturing investment credit (IRC §48D), which currently expires on December 31, 2026. Extension of the credit will be a critical support for our ability to continue building out our (Arizona) Gigafab cluster. TSMC supports legislation recently introduced by Representative Claudia Tenney (R-NY), the Building Advanced Semiconductors Investment Credit (BASIC) Act, to seek this extension. The bill would increase the §48D credit from 25% to 35% and extend the duration through 2030.”

Micron also supported passage of the BASIC Act in its statement.

TSMC noted a Semiconductor Industry Association (SIA) estimate that 58% of new jobs in the U.S. industry risk going unfilled at current degree-completion rates.

“Increasing support for R&D programs to build a pipeline of scientists and engineers, along with expanding support for apprenticeships and university training programs, can contribute significantly to addressing the emerging skills gap,” TSMC said.

Semiconductor technologies underpin U.S. leadership in the technologies of the future – AI, quantum computing, 6G communications – and a range of downstream manufacturing and service industries vital to America’s economic, industrial and military strength, the SIA said in a statement to the Trump administration.

“Without continued access to foreign markets and efforts to increase demand for U.S. chips, our ambitious goals to expand domestic capacity may not be economically viable, as roughly 70% of U.S. semiconductor industry revenue comes from sales to overseas customers,” the SIA said.

Tech war shift

The Trump administration is changing its approach to the tech war with China, TechInsights vice chair Dan Hutcheson told EE Times. “Previous administrations have relied on export controls, and the result has been as we predicted: China reacted by developing its own chips and tools while arguably turning more blind eyes to IP theft,” Hutcheson said. “As this played out, viable competition emerged in China, taking market share from Western companies. More recently, the Trump administration has inverted this. Instead of more restrictions of technology exports to China, it has used the threat of tariffs to prevent other countries from using made-in-China technology. The first test case is the U.S. Bureau of Industry and Security’s recent guidance stating that using Huawei’s Ascend-series AI chips outside China would be a violation. I am hoping for more creative measures like these that enhance America’s technology leaders, not weaken them, to come from the Trump administration.”

From EETimes