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The Impact of a Trump Return on the Global Chip War
The writer is the author of ‘Chip War’
The return of Donald Trump to the White House raises questions about the future of the global chip war. Trump’s first term saw a focus on tech competition with China, with the US extending and expanding policies on tariffs, subsidies, and export controls.
Tariffs and the Chip Industry
The immediate focus is on tariffs, which Trump’s first term drove the sector towards a costly supply chain restructuring, with electronics assembly shifting from China to Mexico and south-east Asia. More tariffs on China are likely, but some south-east Asian countries whose electronics exports have driven higher trade surpluses with the US are also in the crosshairs.
Component Tariffs and the US Chip Industry
Not all US chip companies oppose every type of tariff. Washington is exploring "component tariffs" – taxing imports based on the components inside, rather than the location of final assembly. This would target Chinese chips, regardless of where final assembly occurs.
Export Controls and AI Chips
The Biden administration’s expansion of Trump-initiated policies on export controls on US companies shipping AI chips and chipmaking tools to China is another area of concern. Trump worked with the Dutch government to ban sales of cutting-edge lithography machines to China, and the Biden administration has since cut exports to over 100 companies it says are Huawei-affiliated.
Domestic Manufacturing and the Chips Act
The recent departure of Intel chief executive Pat Gelsinger underscores the challenges the company faces, despite negotiating billions of dollars in grants under the 2022 Chips Act. Trump suggested that tariffs might do more to encourage domestic production, but imposing tariffs on partners like Taiwan would harm Silicon Valley.
The Future of AI Demand and the Chip Industry
The biggest uncertainty is the future of AI demand. Companies like Nvidia and TSMC have been buoyed by investments in AI data centers. Trump advisers say they want to accelerate data center construction by streamlining permitting and encouraging electricity production. The presence of Elon Musk in Trump’s inner circle suggests AI will be a focus.
Conclusion
The chip industry is facing an uncertain future, with the return of Trump to the White House. The biggest challenge is the future of AI demand, which will determine the fate of the industry.
FAQs
Q: What is the impact of a Trump return on the global chip war?
A: Trump’s return raises questions about the future of the global chip war, with a focus on tech competition with China.
Q: What is the current state of the chip industry?
A: The industry is facing a costly supply chain restructuring, with electronics assembly shifting from China to Mexico and south-east Asia.
Q: What are the implications of component tariffs on the US chip industry?
A: Component tariffs would target Chinese chips, regardless of where final assembly occurs, which could benefit the US chip industry.
Q: What is the future of AI demand in the chip industry?
A: The biggest uncertainty is the future of AI demand, which will determine the fate of the industry.
