In prioritising domestic chip manufacturing alongside AI development, America’s AI Action Plan underscores that control over hardware is central to its vision of technological leadership
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The Trump administration unveiled America’s AI Action Plan on 23 July 2025 with the explicit goal of ‘global AI dominance’. It aims to achieve this by rapidly developing AI through deregulation and promoting the export of the full stack of American technology, from models and applications to advanced hardware. Semiconductors are a key element of this ecosystem, and the Plan lays out clear intentions to onshore the industry by streamlining the regulatory process for semiconductor manufacturing and for the creation of data centres in which these chips will run. In prioritising domestic chip manufacturing alongside AI development, the Plan underscores that control over hardware is central to America’s vision of technological leadership.
The Plan has three pillars: innovation, infrastructure, and international diplomacy and security. The second and third pillars specifically discuss semiconductors, with the latter’s focus on export controls, global alignment, and security risks having widespread implications.
The second pillar focuses on building the new infrastructure that AI will require. It calls for creating streamlined permitting for data centres and semiconductor manufacturing facilities, with an emphasis on avoiding adversarial technology that could undermine American infrastructure. The Trump administration plans to significantly reduce regulatory requirements for CHIPS-funded projects and accelerate the integration of advanced AI tools into manufacturing.
The Trump administration plans to significantly reduce regulatory requirements for CHIPS-funded projects and accelerate the integration of advanced AI tools into manufacturing.
The third pillar of the Plan emphasises that access to AI compute power is essential to economic and military capabilities, making it a national security imperative to limit adversaries’ access to it. Export control enforcement becomes an important part of this pillar. The Plan calls for innovation in approaches; it suggests leveraging new and existing location verification features on advanced AI chips to ensure they do not reach prohibited destinations. The recommendation has previously been made in bills introduced over concerns that chips were finding their way to China despite American bans. Lawmakers like Bill Foster, a Democrat from Illinois who was previously a particle physicist, have said the technology to track chips after sale is readily available, and much of it is already in current chips. Google already tracks the location of its in-house AI chips in its vast network of data centres for security purposes.
The Plan further calls for expanded end-use monitoring in countries with a high risk of diversion and the development of new export controls on semiconductor manufacturing subsystems. While the US and allied countries have already imposed export controls on major systems, the mention of component subsystems points to the future direction of American export policies.
There has been a lot of back and forth in American policies on semiconductors in the recent past. Apart from rescinding Biden regulations like the AI diffusion rule, which put a cap on the amount of computing capacity certain countries could buy, Trump has also reversed his policies. After a meeting with Nvidia CEO Jensen Huang, the ban on sales of H20 chips to China was lifted. AMD has also resumed shipments of MI308 accelerators to China that were previously not allowed. While the industry has welcomed the deregulation, it puts the policy in tension with the Plan that is trying to block Chinese access to these exact technologies. Whether the reversal is a singular action or a sign of a more permissive policy is yet to be seen.
Trump is extremely critical of using public money to promote domestic manufacturing and has been pushing for the CHIPS Act to be updated to bring in greater contributions from manufacturers. The Biden strategy relied on the carrot of investments and subsidies. So far, the Trump strategy has used the stick of tariffs. Trump has claimed that he threatened TSMC with 100% tariffs to convince the company to contribute an additional USD 100 billion for its US expansion. While tariffs could work to an extent to push companies to invest in the US, they also run the risk of hurting America’s AI acceleration by making chips too expensive. Due to higher labour and maintenance costs, even after accounting for subsidies, a standard mature logic fab in the US would cost an estimated 10 percent more to build and 35 percent more to operate than a similar facility in Taiwan.
Trump has claimed that he threatened TSMC with 100% tariffs to convince the company to contribute an additional USD 100 billion for its US expansion.
Although the Action Plan does not discuss the use of tariffs to incentivise the reshoring of semiconductor manufacturing, there is an ongoing national security probe into imports of semiconductors. Earlier probes conducted during his first term formed the basis for 25 percent tariffs rolled out on steel, aluminium and auto industries in his current term, and Trump himself has suggested that higher tariffs are on the horizon. Overall, turning the US into a global exporter and industry leader while also limiting adversaries’ benefits from American technology will be a hard balancing act.
The Biden era policy placed India in the middle tier of AI chip export restrictions, which excluded it from the list of 18 countries that had access to advanced AI chips. Trump scrapped the policy just before it came into effect, which made it easier for Indian companies to access AI hardware. The Action Plan’s intention to increase exports could help India meet its own AI ambitions. But it comes with the risk of becoming too comfortable with access. Trump’s volatility, most recently displayed in his sudden announcement of 25 percent tariffs on India as well as a penalty for importing Russian oil, is a warning that overdependence on AI software and hardware can become a strategic vulnerability.
Trump scrapped the policy just before it came into effect, which made it easier for Indian companies to access AI hardware.
Given the centrality of chips to America’s AI vision, the sector is doubly high on the country’s strategic agenda. But it will have to balance its “America First approach to development and leadership with its global engagement. Export controls are most effective when they are narrow, enforceable, and aligned with partners. Unilateral restrictions that outpace global consensus can backfire and undermine the very goals they intend to serve. While cutting regulations can reduce costs, adding tariffs risks driving those costs back up and slowing progress. Finally, while “America First” may resonate domestically, it will not abroad. The US cannot go further and faster alone. As the Semiconductor Industry Association recommended while the Plan was being developed, the US still needs to collaborate with partner nations for R&D, workforce, and manufacturing inputs.
Amoha Basrur is a Junior Fellow at the Centre for Security, Strategy, and Technology at the Observer Research Foundation.
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Amoha Basrur is a Junior Fellow at ORF’s Centre for Security Strategy and Technology. Her research focuses on the national security implications of technology, specifically on ...
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