Proposed cuts at a key US government agency will likely mean the demise of CHIPS Act funding, which could effectively end the program and undermine efforts to reshore semiconductor manufacturing and research to the US.Axios and Bloomberg on Tuesday reported that the National Institute of Standards and Technology (NIST) plans to cut 497 jobs this week. NIST, a non-regulatory agency within the US Department of Commerce (DoC), helps drive innovation and industrial competitiveness and, overseas, the CHIPS for America program.Robert Maire, president of consulting firm Semiconductor Advisors, wrote in a blog post that the plan to cut NIST staff isnt bluff or negotiation tactic. Instead, the layoffs signal a complete shift in direction under US President Donald J. Trump, he said.Trump made it clear over the last few days that he will institute 25% tariffs on imported semiconductor devices, so [its] obvious that strategy is shifting from incentivizing US chip production to penalizing imports instead, Maire said. This also lowers the likelihood of TSMC taking over Intel manufacturing, as giving top US chip production to Taiwan contradicts the new strategy.The Trump Administration, Maire said, hasnt fully considered the impact of the cuts, since 100% of AI chips, most Intel chips, all AMD chips, TSMC customers chips, and more than 80% of memory chips are imported with the majority of them outside the US.Obviously chip manufacturing companies will slow spending on programs they previously thought they were getting CHIPS Act funding for, if not cancel those projects outright, Maire said. If I were running a chip company, I would not count on CHIPS Act funding even if I had a signed contract, as its clearly not worth the paper its written on if NIST is eviscerated.Industry analysts have agreed in the past that tariffs on imports will act as a penalty on the industry, while the CHIPS Act hallmark legislation passed three years ago under then-President Joseph R. Biden Jr. acts an incentive.Jack Gold, principal analyst with tech industry research firm J. Gold Associates, has called Trumps plan to enact tariffs on oversea chip makers is simply wrong. Funds already granted under the CHIPS Act should be safe if transferred, but with NIST staff cuts, the program could stall without oversight, he said.Ending it would be a mistake, Gold said, arguing that incentives work better than tariffs for bringing chip manufacturing back to the US. If funding is pulled, companies like Intel might halt their projects, as they likely cant replace the lost funding, he added.I dont know how the companies (Intel and others) would replace the funding if it gets pulled, Gold said. In fact, I think its unlikely and the chip guys would just shutter whatever they are building, at least for the near term.The issue goes beyond CHIPS funding, Gold added, saying program cuts will hurt local communities expecting new facilities that would create jobs, pay taxes, and boost the economy. Areas such as Ohio, where projects were planned, will miss out, he said. And, local politicians in states expecing the grant monies, including New York, Ohio, Texas, and Arizona, are likely unhappy, he said.As for why Trump and company would do this, I think its just a short sighted view of, Lets cut all spending, without regard for what that spending ultimately means. As I said, you cant accomplish bringing back manufacturing to the US simply by penalizing with tariffs. It wont work, Gold said. Besides, it takes three to four years to build out a new fab, so imagine that amount of tariffs going into our products. What doesnt have a chip in it these days? We will all be paying more for things.The CHIPS Actwas passed overwhelmingly in 2022by both houses of Congress to address computer chip supply chain shortages that surfaced during the COVID-19 pandemic. Thelegislation provided the Commerce Department with $52.7 billion for a suite of programs to revitalize the US position in semiconductor research, development, and manufacturing.To date, the DoChas allocated, but not dispensed, about $32 billionin funding among chipmakers, includingIntel,Samsung,Micron,TSMC, andTexas Instruments, all of whom haveunveiled plans for a number of new US chip fabrication plants. In return, those chip designers and makers have pledged about $300 billion in current and future projects in the US, according to the White House under Biden.The CHIPS Act has spurred $450 billion in private investment across 28 states, creating 58,000 jobs,according to the Semiconductory Industry Association.With the CHIPS Act spurring them on, the likes ofQualcomm, in partnership with GlobalFoundries,also said it would invest$4.2 billionto double chip production in its Malta, NY, facility.Despite widespread bipartisan backing, some members of Congress expressed concerns about certain provisions, such as the level of government subsidies or the potential for the bill to benefit only a few large tech companies. Still, the majority of both Democrats and Republicans recognized the strategic importance of boosting semiconductor production on US soil.In addition to Trumps opposition, House Speaker Mike Johnson said in 2024 that Republicans would likely repeal the CHIPS Act. Johnson, who voted against the measure, later walked his comments back,saying he would like to streamline it, according to The Associated Press.