US Government Considers Equity Stakes in Chip Companies, Sparking Industry Debate

Trump administration official says some CHIPS Act companies won't need to give up equity

Unlike Intel, TSMC and Micron will be exempt due to their expanded investments. Last week, the Trump administration said it might take a stake in Intel in exchange for the $10.86 billion in federal grants the company is receiving from the Chips and Science (CHIPS) Act. However, not all companies receiving funds under the same program will need to give up equity, The Wall Street Journal has reported. Companies like TSMC and Micron that increased their US investments won't have any additional obligations, according to a government official familiar with the matter. Ealier, commerce secretary Howard Lutnick appeared to royally screw NVIDIA with comments about the company's H20 AI chips, and may have also rubbed chip giant TSMC the wrong way. "The Biden administration literally was giving Intel [money] for free, and giving TSMC money for free, and all these companies, just giving them money for free," he told CNBC on Tuesday. "Donald Trump turns that into saying, 'Hey, we want equity for the money. If we're going to give you the money, we want a piece of the action.'" However, TSMC may have noticed the Intel equity kerfuffle and executives reportedly held preliminary discussions about handing back subsidies if the US government asks to become a shareholder, according to the WSJ's sources. TSMC was awarded $6.6 billion for its Arizona plant that started producing chips late last year for Apple and others. However, the company recently said it would invest another $100 billion over the next four years to build three more fabrication plants, two advanced packaging facilities and a major research and development center. Because of that extra investment, the Trump administration won't ask for a piece of TSMC or Micron (which also expanded its US facilities in Idaho, New York and Virginia). "The Commerce Department is not looking to take equity from TSMC and Micron," an unnamed official said. In any case, attempts by the US government to take equity in companies will likely face legal challenges due to language in the contracts. Companies are already required to share revenue with the US government if profits rise above a certain amount. In another development, the US government may divert up to $2 billion in CHIPS Act funding toward critical minerals projects in the US, Reuters reported. The move aims to reduce US dependence on China for key minerals extensively used in the electronics and defense industries. "The administration is creatively trying to find ways to fund the critical minerals sector," Reuters' source said, adding that those plans could change.

Towards US government involvement in Micron?

The administration has unveiled plans to convert part of the CHIPS Act subsidies paid to Intel into a stake of nearly 10%. The move would strengthen the competitiveness of the US chipmaker, which is still lagging behind its two major rivals: Arm in the CPU segment and TSMC in foundry services. For the US government, this is a move to take a direct stake in an industry considered strategic, at a time when the US is aiming to build the world's largest semiconductor factory in Ohio. Commerce Secretary Howard Lutnick said on CNBC that Washington now wants a return on its "investments": "We will get equity in return... instead of just giving grants." This suggests that Intel will not be an isolated case. In market rumors, the name Micron comes up regularly. Micron is positioned in a critical segment: HBM memory chips, which are essential for GPUs used in data centers. The market is contested by only three global players, Micron, SK Hynix, and Samsung, and strengthening the US champion in this area would make sense, especially as it could be linked to the Stargate project and future infrastructure in Ohio. Intel and Micron are not the only beneficiaries of the CHIPS Act: TSMC and Samsung are also receiving subsidies. But how would the US government justify taking a direct stake in South Korean or Taiwanese companies, especially in a sector as strategic as artificial intelligence? For now, the situation remains unclear. Intel's deal is still being negotiated, proof that Washington is feeling its way in this interventionist shift. If Micron were to follow suit, it would mark another step toward a profound change in the US government's role in the semiconductor industry.