CHIPS Act 2.0: Strengthening the Chip 4 Alliance or Driving it Apart?

FILE - Taiwan Semiconductor Manufacturing Company founder Morris Chang speaks at the new facility in Phoenix, Dec. 6, 2022.

Introduction 

A policy meant to strengthen could also divide. The CHIPS and Science Act was designed to secure America’s semiconductor dominance but could its revision now might strain the very alliance meant to counter China?

The United States, once a leader in semiconductor manufacturing, has seen its global share decline from 37% in 1990 to about 12% today (Executive Office of the President et al., 2022; Semiconductor Industry Association, 2022). Decades of offshoring, driven by lower costs and stronger infrastructure in Asia, have shifted the industry’s center of gravity. Today, nearly 90% of advanced semiconductor manufacturing is concentrated in Taiwan and South Korea, making the region indispensable to global supply chains (Miller, 2022). To turn the tables and bring back manufacturing to American soil, Washington under Biden administration, signed the bipartisan CHIPS and Science Act (The Creating Helpful Incentives to Produce Semiconductors) on 9 August 2022, which represents a pivotal effort to revitalise America’s semiconductor industry and technological leadership (White House, 2022). The Act allocated $53 billion in federal incentives to boost domestic semiconductor manufacturing and R&D (Research & Development), with $39 billion designated for companies setting up new manufacturing sites in the US. It also offers a 25% tax credit for eligible companies (The Indian Express, 2025, March 5). In its final weeks, the Biden administration’s Commerce Department approved over $33 billion in awards, including $4.745 billion for South Korea’s Samsung Electronics, up to $7.86 billion for Intel, $6.6 billion for TSMC, and $6.1 billion for Micron (The Indian Express, 2025, March 5). The act aims to secure the U.S. semiconductor supply chain which is crucial for consumer electronics and advanced military systems (Badlam et al., 2022). While this ambitious policy is designed to enhance domestic innovation and reduce reliance on foreign manufacturing, its long-term impact on global semiconductor alliances remains a critical question, could it strengthen collaboration, or risk straining key partnerships like the Chip 4 alliance, the very partnerships meant to counter China?  To understand the stakes, it is essential to examine the Chip 4 alliance, an initiative at the heart of Washington’s semiconductor strategy. 

The Chip 4 Alliance: A Strategic Bloc

The Chip 4 alliance also known as Fab 4, brings together the United States, Japan, South Korea, and Taiwan and stands as a critical pillar in securing semiconductor supply chains and pushing back against China’s expanding grip on the industry (Lee, 2024., Peterson, 2022). Together, these nations control 82% of the global semiconductor market and an overwhelming 99% of memory chip production, making their collaboration a formidable counterweight to Beijing’s ambitions (Lee, 2024). Now, it is crucial to examine how the Trump administration set the stage for a possible revision of the CHIPS Act and what this could mean for the future of the alliance. 

Trump’s Proposed Revisions to the CHIPS Act

The Trump administration has laid the groundwork for potential revisions to the CHIPS and Science Act of 2022, aiming to modify its implementation rather than pursue a full repeal (Stone et al., 2025).

Some of the possible revisions Trump Administration suggest are: 

Trump is proposing a new approach to semiconductor manufacturing in the U.S., aiming to boost domestic production by replacing subsidies with tariffs (Parvini, 2025).  Currently, companies like Taiwan’s TSMC receive billions in government funding to build factories in the U.S. However, under Trump’s plan, they would no longer get these subsidies (Parvini, 2025) . Instead, if they manufacture chips outside the U.S. and try to sell them in the American market, they would face tariffs (import taxes). The goal is to push companies to build and produce chips in the U.S. without relying on government financial support (Parvini, 2025).

Additionally, companies that accept the U.S. government funding but continue to expand their operations in other countries could face penalties or have to return some of the funds (Parvini, 2025). For example, if TSMC takes U.S. subsidies but also invests heavily in Taiwan, it may receive reduced funding or face stricter regulations. This policy shift aims to make the U.S. more self-reliant in chip manufacturing and reduce dependence on foreign supply chains (Parvini, 2025). The administration is reconsidering previously finalised agreements under the CHIPS Act, which could lead to delays or modifications in funding allocations  (Bloomberg, 2024). Intel’s recent $300 million investment in a Chinese facility, despite securing CHIPS funding, has come under intense scrutiny. With Trump’s policies in play, such projects may now be subject to renegotiation or even potential penalties (Bloomberg, 2024). The administration is growing increasingly frustrated with companies benefiting from U.S. subsidies while simultaneously expanding operations abroad, especially in China. TSMC’s continued investments in Taiwan, alongside its Arizona facility, could come under  scrutiny, with the possibility of penalties or even a reversal of funds under revised terms (Dumas, 2025). 

Pushback Against Trump’s Proposed Revisions

Critics warn that Trump’s proposed changes could undercut the core objectives of the CHIPS Act, reducing dependence on foreign semiconductors and strengthening U.S. technological leadership  (Metzger & Zinkula, 2025). Stripping away progressive guidelines may erode labour protections and environmental goals, while shifting from subsidies to tariffs risks driving up costs for consumers and industries that rely on semiconductors. Additionally, delays and renegotiations inject uncertainty for companies like Intel and TSMC, potentially disrupting critical projects essential to national security and economic competitiveness (Metzger & Zinkula, 2025).

With these policies setting the stage, the Chip 4 alliance, comprising the United States, Taiwan, South Korea, and Japan, was established as a strategic bloc to counterbalance China's semiconductor ambitions. However, while intended to strengthen cooperation, the alliance faces inherent challenges that could either solidify or fracture its unity under the CHIPS Act 2.0. This alliance aims to enhance semiconductor supply chain resilience and reduce reliance on Chinese manufacturing.

Strengthening the Chip 4 Alliance

Proposed legislative measures, such as the Chip EQUIP Act, seek to restrict U.S. semiconductor manufacturers from utilising equipment sourced from “foreign entities of concern,” particularly China. This move aligns with broader strategic efforts to limit China’s influence in the global semiconductor supply chain while reinforcing collaboration among Chip 4 members to advance secure and resilient manufacturing technologies (Kustka, 2023).

The CHIPS Act plays a crucial role in diversifying and securing global semiconductor supply chains while fostering partnerships with key allies like Japan and South Korea in research and development (Roy, 2024). By strengthening domestic manufacturing and expanding collaborative efforts, the Act not only reduces reliance on politically sensitive regions like China but also reinforces the alliance’s technological leadership and supply chain resilience (Roy, 2024).

Weakening the Chip 4 Alliance

The CHIPS Act has allocated around $52 billion to support the semiconductor industry, with $39 billion going toward manufacturing grants and $11 billion for research and development. This funding has already helped attract nearly $450 billion in private investments from leading companies like Intel, TSMC, and Samsung. If the act were repealed, it could cause a major decline in these investments, putting the U.S. at a disadvantage in the global tech race (Shepardson, 2025).

A repeal or major revision of the CHIPS Act could undermine U.S. leadership in semiconductor manufacturing by weakening domestic investments and forcing companies to seek subsidies elsewhere, potentially shifting focus to Asia or Europe (Hall, 2025). This instability could also disrupt long-term supply chain planning for Chip 4 partners like Taiwan and South Korea, which rely on U.S.-led initiatives. As a result, trust and coordination within the alliance may erode, affecting its collective ability to secure and advance semiconductor production (Hall, 2025). Also weakened U.S. semiconductor sector could create openings for China to expand its influence over global supply chains, directly challenging the Chip 4 Alliance’s strategic goal of countering Beijing’s dominance. This shift could further destabilize the alliance’s efforts to secure and advance semiconductor manufacturing.

Strengthening the CHIPS Act with tighter security measures and broader international collaboration could boost the Chip 4 Alliance by building trust and improving joint capabilities. On the other hand, repealing it could weaken U.S. leadership, create uncertainty for partners, and give China more control over global supply chains. The outcome will depend on how these changes align with the alliance’s goal of securing supply chains and countering Beijing’s influence.

Conclusion

The future of the CHIPS Act will determine whether the Chip 4 Alliance remains a united front against China’s growing semiconductor dominance or fractures under shifting U.S. policies. Strengthening the Act with stricter security measures and expanded collaboration could solidify trust among allies, reinforcing the alliance’s collective ability to secure critical supply chains. However, drastic revisions—such as replacing subsidies with tariffs or penalizing companies for overseas investments—risk creating instability, eroding partnerships, and opening opportunities for Beijing to assert greater control.

Ultimately, Washington’s approach must strike a balance between securing domestic semiconductor production and maintaining strong international cooperation. A miscalibrated strategy could weaken the very partnerships needed to challenge China’s influence, while a well-executed policy could cement the Chip 4 Alliance as a formidable force in the global semiconductor race.

References 

Primary Sources 

Executive Office of the President, President’s Council of Advisors on Science and Technology, Arnold, F. H., Collins, F. S., Zuber, M. T., Arvizu, D. E., Assanis, D., Banovetz, J., Carter, A., Colón, F., Cooper, L. A., Dabiri, J. O., Dally, W., Desmond-Hellmann, S., Fung, I., Goldsmith, A., Greene, L. H., Hammond, P., Horvitz, E., . . . Pacala, S. (2022). Revitalizing the U.S. semiconductor ecosystem. White House. https://bidenwhitehouse.archives.gov/wp-content/uploads/2022/09/PCAST_Semiconductors-Report_Sep2022.pdf. 

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