Trump Has Made Himself Commander in Chief of the Chip Industry

Trump has threatened to take away government grants, restricted billions of dollars in sales, warned of high tariffs on chips made outside the United States, demanded investments and urged one company, Intel, to fire its CEO.

SAN FRANCISCO -- At an Oval Office meeting last week, President Donald Trump dangled an offer to Jensen Huang, the CEO of Nvidia. Trump said there would be a price for granting Nvidia the licenses it needed to sell artificial intelligence chips to China.

"I want 20%," Trump said.

"Will you make it 15?" Huang asked.

Trump, who recounted the meeting during a press event Monday, agreed to the counterproposal. Two days later, the administration granted Nvidia the licenses it wanted, with the unorthodox payments expected to go to the government.

The negotiation was the most prominent example of Trump's blunt interventions in the global operations of the chip industry's most powerful companies. He has threatened to take away government grants, restricted billions of dollars in sales, warned of high tariffs on chips made outside the United States, demanded investments and urged one company, Intel, to fire its CEO.

In just eight months, Trump has made himself the biggest decision-maker for one of the world's most economically and strategically important industries, which makes key components for everything from giant AI systems to military weapons. And he has turned the careful planning of companies historically led by engineers into a game of insider politics.

The intrusion into private business underscores how far this administration has veered from the hands-off economic philosophy of President Ronald Reagan, which guided the Republican Party for decades.

Economic historians have said it is the most aggressive federal incursion into the U.S. economy since the Obama administration's actions in 2008 to rescue banks and the auto industry and avoid a worsening financial crisis. This time, they say, the intrusion is unprovoked.

"This isn't rational industrial policy. This is intervention into who runs companies and threatening businesses with penalties if they don't do what Trump says," said Anne E. Harrison, a professor of economics at and former dean of the Haas School of Business at the University of California, Berkeley. "He's micromanaging."

The legality of Trump's deals is unclear. There is no precedent in the government for collecting fees in exchange for granting export licenses, as Trump plans to do with Nvidia and a smaller competitor, Advanced Micro Devices. The Commerce Department did not respond to questions about how the administration will collect payments or where those payments will go.

Trump's arm-twisting has put the chip industry on edge. Manufacturers prefer predictability because building plants takes years and costs tens of billions of dollars. Chipmakers also spend years designing chips and the processes to produce them.

But with Trump in charge, companies don't know when they may be pressured to change their business plans, said Jimmy Goodrich, a senior adviser at the RAND Corp. and former policy leader at the Semiconductor Industry Association. Industry leaders have been left with little choice but to grovel for a presidential reprieve with financial promises and gifts, like a plaque with a gold base that Apple CEO Tim Cook presented to Trump last week.

"The whole thing is a roller-coaster ride," Goodrich said. "It's up and down and in who knows what direction because Trump is dealing with these issues as they come."

The $600 billion semiconductor sector has long been the tip of the spear for the technology industry. The AI boom of the last three years reinforced that notion, turning Nvidia, now worth more than $4.4 trillion, into the most valuable publicly traded company in the world. Huang, a little known Silicon Valley veteran, has also become one of the industry's most prominent personalities.

But chips are important not just to tech companies. They are a key component in modern weapons and appliances, and control almost everything that has an on-off switch. But most advanced chips are made in Taiwan, a self-governing island that could one day be under threat of a Chinese invasion. Trump is pressing the industry to start making more of those chips in the United States.

Kush Desai, a White House spokesperson, said in a statement that the industry's importance justified Trump's involvement. "Americans cannot afford another autopen administration lackadaisically dropping the ball in this space," Desai added, "and President Trump's hands-on leadership in the chip industry underscores this administration's commitment to safeguarding our national and economic security."

When Trump was last in office, he blocked chip companies from working with Huawei, the Chinese tech giant, and worked with Taiwan Semiconductor Manufacturing Corp., or TSMC, to start an advanced chip factory in Arizona.

President Joe Biden expanded on those efforts with the CHIPS Act, a bipartisan bill to provide $52 billion in subsidies and tax credits for manufacturing chips in the United States. He also restricted semiconductor sales to China.

Since returning, Trump has ratcheted up the pressure. Early this year, his administration threatened to withhold grants from chip companies unless they agreed to invest more in the United States.

Trump also told tech executives that he was considering tariffs on semiconductors unless they bought more chips made in the United States. His administration started an investigation to put tariffs on semiconductors under a national-security-related law known as Section 232.

In March, TSMC said it would invest $100 billion in the United States on three new factories and two facilities to package chips. Micron Technology, which makes memory chips, said it would increase U.S. investments by $150 billion.

As they have navigated Trump's sometimes personal attacks, many executives have traveled to Washington to plead their cases directly with him.

"CEOs have decided the best strategy is to form, to the degree possible, a direct relationship with the president," said Chris Miller, a history professor at Tufts University and the author of the book "Chip War." "Lobbying by industry associations is much less potent."

Huang, 62, has emerged as the industry's de facto leader. He suffered a setback in April when Trump restricted sales of a chip, the H20, that Nvidia had designed for China. The restriction cost the company $5 billion.

But Huang still traveled with the president to the Middle East and helped him negotiate one of the largest-ever chip deals with another country: the sale of 500,000 semiconductors to the United Arab Emirates. Trump praised the deal and called Huang a friend.

At a White House meeting in July, Huang asked Trump to lift the ban on AI chip sales to China, arguing that the chips were less powerful than those sold in the United States. Trump agreed. But the administration did not grant the licenses necessary for those exports. When Huang returned to the White House last week and asked for the licenses, Trump used the visit to secure a 15% share of those chip sales for the federal government.

Cook also appeared with Trump at the White House last week to announce that Apple would invest an additional $100 billion in the United States, with some of that going to U.S. chipmakers. Just weeks earlier, Trump was publicly tweaking Cook, saying Apple was dragging its feet on bringing some of its manufacturing to the United States.

Trump used Cook's visit to announce that he would impose a 100% tariff on foreign semiconductors. But if, like Apple, companies invested in the United States, they would be spared from levies, he said.

Then on Monday, the president said he might also allow Nvidia -- for the right price -- to sell China a less powerful version of its newest and more powerful AI chip. "I think he's coming to see me again about that," Trump said of Huang.

Nvidia declined to comment. In a previous statement, it said it followed the government's rules.

That same day, Trump met with Intel's new CEO, Lip-Bu Tan. Intel, the once-pioneering chipmaker, ousted its CEO last year and replaced him with Tan, a well-known investor and executive with a record of investing heavily in China's semiconductor industry.

Just a few days earlier, Trump demanded in a social media post that Intel change its leadership because Tan was "highly CONFLICTED." The attack came after Cadence Systems, which Tan previously led, pleaded guilty to violating U.S. government restrictions by selling technology to a Chinese university that works on nuclear explosive simulations.

After their meeting, Trump backed off his demand, but hinted that he wasn't done dealing with Intel: He said Tan would meet with Cabinet officials and "bring suggestions to me."

This article originally appeared in The New York Times.