Trump Tariffs Delay Samsung's Texas Fab, Threaten U.S. Semiconductor Growth

In the lead-up to the "America First" policy becoming the core principle of the Trump administration's foreign policy and trade, one industry had already been striving to bring its business back to the United States: the semiconductor industry.

Driven by government incentives, American and foreign tech companies have invested billions of dollars in recent years to strengthen semiconductor operations across the country, including research and development, manufacturing, and facility modernization.

The growth of the U.S. semiconductor industry is particularly evident in the Greater Sacramento region. For years, tech leaders and legislators have been committed to enhancing California's role in producing chips needed for everyday items like cars, refrigerators, and smartphones. Semiconductor giants such as Intel, AMD, Bosch, Samsung, and Micron, clustered in cities on the outskirts of Silicon Valley, are expanding based on the technological foundation laid by Intel's establishment of a park in Sacramento County in 1984.

However, President Donald Trump's economic policies have cast a shadow over this growth. Currently, the U.S. government is taking the next steps, planning to impose more tariffs on key imported goods and investigating the import of computer chips and chip-making equipment, just as deep investments in the semiconductor sector are beginning to positively impact supply chain transformations. New tariffs, coupled with government threats to the CHIPS and Science Act, could significantly delay the U.S. goal of maintaining a competitive edge in artificial intelligence development.

“You are already starting to see some impacts. Samsung has announced a delay in the construction of its Texas fab,” said Mario Morales, an analyst at IDC. “The fab was originally scheduled to come online in 2024, but is now delayed until 2028. I think some companies are delaying because they now know they might not be able to secure funding, or because of the uncertainty surrounding new trade policy-related legislation.”

According to data from the Semiconductor Industry Association, while the U.S. is a major producer of certain types of semiconductor chips, its global chip production share (measured by volume rather than dollar value) has fallen from 37% in 1990 to just 10% in 2022. As a result, the U.S. heavily relies on imports of advanced chips from China and South Korea.

Major manufacturers like TSMC are investing in building U.S. factories, partly due to incentives introduced during the Biden administration. The CHIPS Act, passed with bipartisan support in 2022, aims to revitalize the U.S. semiconductor manufacturing industry, enhance U.S. military technological superiority, and minimize future supply chain disruptions.

According to a report by the Semiconductor Industry Association and the Boston Consulting Group in May 2024, the U.S. semiconductor manufacturing capacity is expected to more than double due to the CHIPS Act, the highest growth rate globally during the same period.

The fragility of the semiconductor supply chain became apparent during the pandemic, when the U.S. experienced supply shortages. “It is clear that outsourcing these chip products to Vietnam, China, and China Taiwan for cost savings has had serious consequences,” said Barry Broome, chairman of the Greater Sacramento Economic Commission.

He noted that the challenges faced during the pandemic prompted the industry to shift towards the Sacramento region. With federal subsidies now driving domestic growth, Northern California's rich technological knowledge and deep roots in the semiconductor industry are attractive qualities for investment in the Sacramento region.

For example, German tech company Bosch announced a 1.9 billion dollar investment in the Greater Sacramento region in 2023 to produce electric vehicle chips, transforming its factory in Roseville into a silicon carbide semiconductor production base.

Bosch stated that this investment will create up to 1,700 jobs in construction, manufacturing, engineering, and research and development. Broome described the project as the largest semiconductor investment in California in three decades.

Tech workers who started with companies like Intel have founded their own enterprises, including AI startup Blaize and data storage manufacturer Solidigm in the Sacramento region.

Blaize co-founder Dinakar Munagala noted that their AI chips are among the few products manufactured domestically. He said their chips are produced at Samsung's fab in Texas. Munagala added that their products power systems for analyzing traffic patterns and detecting suspicious behavior at airports.

“We have established our business here,” he said, “and this is one of the reasons we have gained considerable attention from categories like defense and border security.”

Blaize board chairman Lane Bess pointed out that Munagala, who previously worked at Intel, is an example of how the Sacramento region can provide talent for tech companies. Bess said the region has the potential to become a major corridor for the semiconductor industry as many tech workers seek to start their own companies.

The Trump administration views chip production as a national security issue, as it reduces U.S. dependence on imported chips used by the military. The government also plans to study the risks of computer chip production being concentrated in other regions and the impact of foreign government subsidies, “unfair foreign trade practices, and state-supported excess capacity” on U.S. competitiveness.

Alvin Nguyen, a senior analyst at Forrester, stated that the uncertainty surrounding government tariff policies will cause chaos in supply chain impacts, “because tracking the production and assembly locations of materials and finished products is very complex.”

For the semiconductor industry, some products may no longer be worth producing due to cost reasons, such as the Nintendo Switch 2, and the value of IT procurement is also declining, he said in an email.

In the medium term, the growth of global foundries will help alleviate dependence on chip production in China Taiwan. In the long term, “we should see a healthier global semiconductor manufacturing ecosystem and more supply chain choices in chip production and procurement locations,” he said.

Broome of the Economic Commission believes that Trump's tariffs are aimed at restructuring global relations. He hopes “this situation will end quickly” because trade policy uncertainty is detrimental to the market.

“If tariffs are used as a bargaining chip to reach a better agreement in the next two or three months, we will quickly recover and benefit from it,” Broome said. “If they are seen as a long-term policy, I think this will truly hinder the capital market from investing real money.”