Trump has made himself commander-in-chief of the chip industry
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In just eight months, he has made himself the biggest decision-maker for one of the world’s most economically and strategically important industries.
PHOTO: EPA
Tripp Mickle
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SAN FRANCISCO - At an Oval Office meeting last week, US President Donald Trump dangled an offer to Mr Jensen Huang, the chief executive of Nvidia. Mr Trump said there would be a price for granting Nvidia the licences it needed to sell artificial intelligence (AI) chips to China.
“I want 20 per cent,” Mr Trump said.
“Will you make it 15?” Mr Huang asked.
Mr Trump, who recounted the meeting during a press event on Aug 11, agreed to the counterproposal. Two days later, the administration granted Nvidia the licences it wanted
The negotiation was the most prominent example of Mr Trump’s blunt interventions in the global operations of the chip industry’s most powerful companies.
He has threatened to take away government grants, restricted billions of dollars in sales, warned of high tariffs on chips made outside the US, demanded investments and urged one company, Intel, to fire its CEO.
In just eight months, Mr Trump has made himself the biggest decision-maker for one of the world’s most economically and strategically important industries, which makes key components for everything from giant AI systems to military weapons. And he has turned the careful planning of companies historically led by engineers into a game of insider politics.
The intrusion into private business underscores how far this administration has veered from the hands-off economic philosophy of former president Ronald Reagan, which guided the Republican Party for decades.
Economic historians have said it is the most aggressive federal incursion into the US economy since the Obama administration’s actions in 2009 to rescue banks and the vehicle industry and avoid a worsening financial crisis. This time, they say, the intrusion is unprovoked.
“This isn’t rational industrial policy. This is intervention into who runs companies and threatening businesses with penalties if they don’t do what Trump says,” said Dr Ann E. Harrison, a professor of economics and former dean of the Haas School of Business at the University of California, Berkeley. “He’s micromanaging.”
The legality of Mr Trump’s deals is unclear. There is no precedent in the government for collecting fees in exchange for granting export licences, as Mr Trump plans to do with Nvidia and a smaller competitor, Advanced Micro Devices.
The Commerce Department did not respond to questions about how the administration will collect payments or where those payments will go.
Mr Trump’s arm-twisting has put the chip industry on edge. Manufacturers prefer predictability because building plants takes years and costs tens of billions of dollars. Chipmakers also spend years designing chips and the processes to produce them.
But with Mr Trump in charge, companies do not know when they may be pressured to change their business plans, said Mr Jimmy Goodrich, a senior adviser at the Rand Corporation and former policy leader at the Semiconductor Industry Association.
Industry leaders have been left with little choice but to grovel for a presidential reprieve with financial promises and gifts, like a plaque with a gold base that Apple CEO Tim Cook presented to Mr Trump last week.
“The whole thing is a roller-coaster ride,” Mr Goodrich said. “It’s up and down and in who knows what direction because Trump is dealing with these issues as they come.”
The US$600 billion (S$768 billion) semiconductor sector has long been the tip of the spear for the technology industry.
The AI boom of the last three years reinforced that notion, turning Nvidia, now worth more than US$4.4 trillion, into the most valuable publicly traded company in the world. Mr Huang, a little known Silicon Valley veteran, has also become one of the industry’s most prominent personalities.
But chips are important not just to tech companies. They are a key component in modern weapons and appliances, and control almost everything that has an on-off switch. But most advanced chips are made in Taiwan, a self-governing island that could one day be under threat of a Chinese invasion.
Mr Trump is pressing the industry to start making more of those chips in the United States.
Mr Kush Desai, a White House spokesman, said in a statement that the industry’s importance justified Mr Trump’s involvement.
“Americans cannot afford another autopen administration lackadaisically dropping the ball in this space,” Mr Desai added, “and President Trump’s hands-on leadership in the chip industry underscores this administration’s commitment to safeguarding our national and economic security”.
When Mr Trump was last in office, he blocked chip companies from working with Huawei, the Chinese tech giant, and worked with Taiwan Semiconductor Manufacturing Company, or TSMC, to start an advanced chip factory in Arizona.
Then President Joe Biden expanded on those efforts with the Chips Act, a bipartisan Bill to provide US$52 billion in subsidies and tax credits for manufacturing chips in the US. He also restricted semiconductor sales to China.
Since returning to office, Mr Trump has ratcheted up the pressure
Mr Trump also told tech executives that he was considering tariffs on semiconductors unless they bought more chips made in the US. His administration started an investigation to put tariffs on semiconductors under a national security related law known as Section 232.
In March, TSMC said it would invest US$100 billion in the US for three new factories and two facilities to package chips. Micron Technology, which makes memory chips, said it would increase US investments by US$150 billion. NYTIMES
