Trump Administration Overhauls CHIPS R&D Plans

In late August, Commerce Secretary Howard Lutnick announced he was “clawing back” $7.4 billion from Natcast, a nonprofit created in 2023 to operate the National Semiconductor Technology Center, a public-private consortium intended to support the U.S. semiconductor industry. The administration has offered new details on its NSTC overhaul, emphasizing its intent to use a single solicitation to rapidly allocate billions of dollars.

In his publicly posted letter to then-CEO of Natcast Deirdre Hanford, Lutnick argued that the Biden administration had broken the law by giving agency authority to an outside body and criticized Natcast as a “slush fund that did nothing but line the pockets of Biden loyalists.”

The National Institute of Standards and Technology has since issued a broad solicitation for semiconductor research, which Deputy Secretary of Commerce Paul Dabbar said will be “the primary mechanism” for the department to make awards for the NSTC and other CHIPS R&D programs. He added that the department will be “fully utilizing the dollars appropriated” to CHIPS R&D and that “this process is intended to be nimble and capable of moving on a business-like timeline.”

The solicitation states that awardees may be required to issue royalties or otherwise share revenue with the Commerce Department. NIST staff said in the webinar that the agency “will mirror a more venture capital-style approach” and “strongly recommended” that every applicant “suggest an approach to a financial return on investment to the American taxpayer” in their proposals. Proposals should seek at least $10 million and will be accepted on a rolling basis through Sept. 30, 2029, NIST staff said.

FYI spoke to five people who served on Natcast’s board of trustees or oversaw Natcast while employed by federal agencies. All were granted anonymity because they feared retaliation for criticizing the Trump administration.

Two former Commerce officials said they believe Lutnick will use the solicitation to accelerate product development at private semiconductor companies in exchange for equity, instead of focusing on high-risk, exploratory research. In August, the White House took a stake in Intel and made a deal with Nvidia and AMD to collect 15% of their revenue from chip sales to China. Lutnick has also proposed taking a cut of university patents that result from federally funded research.

Sources said major delays to Natcast’s work began from the start of the Trump administration. A complete lack of approvals from Commerce Department leadership prevented Natcast from moving forward with finalizing their research agenda, new research awards, investment fund plan, and plans for three flagship R&D facilities, one source said.

The funding for the three R&D facilities has been canceled, and Lutnick now plans to use the Natcast funds for projects that will have short-term achievements before the end of the Trump administration, instead of continuing to establish an entity focused on long-term issues for the industry, as Natcast’s creators envisioned, sources said.

“I don’t know that there’s a right or wrong. It just depends,” one former Commerce Department official said. “Would you like to just spend the money and be done with it, and then the industry picks it up? Or do you want this to become an enduring institution for many decades?”

The former Commerce official said “almost everyone” at the Commerce Department who oversaw the NSTC left this year, even before Lutnick’s announcement cancelling Natcast. They said the department appears to be consolidating staff to oversee a broader group of semiconductor-related programs at NIST, such as the NSTC and the National Advanced Packaging Manufacturing Program. The department also disbanded the Industrial Advisory Committee, which advised the department on long-term issues for Natcast, a former IAC member said.

Natcast has laid off most of its staff, keeping a few employees needed to finish winding down the organization’s activities. Even if NIST wanted to follow Natcast’s plans, they would need 200 to 300 people, many with technical expertise, another former Commerce official said.

The Commerce Department and NIST did not respond to requests for comment.

R&D facilities canceled

The NSTC’s three R&D facilities were intended to fill the gap between small-scale experiments in university labs and R&D in a company’s manufacturing line, one former Commerce Department official said.

One selected facility, the Albany Nanotech Complex in New York, has existed since 1997. The Commerce Department and Natcast said they would initially spend up to $825 million to stand up the Extreme Ultraviolet Accelerator facility in the complex, which would provide access to EUV technology with standard numerical aperture capabilities by 2025 and higher ones by 2026. Higher NA allows for more intricate printing on a transistor so that more transistors can fit on one chip wafer, giving each chip greater processing power.

The other two facilities, a Design and Collaboration Facility in California and an Advanced Packaging Piloting Facility in Arizona, will not be built. Natcast had already funded a large team to design the Arizona facility and will likely face a penalty for canceling prematurely on the California site, one source closely associated with Natcast said.

The three facility grantees did not respond to requests for comment. Politico reported that a spokesperson for NY CREATES, which owns the Albany Nanotech Complex, noted that New York state had also committed $1 billion to expand the complex but did not answer further questions about how replacement funding would be secured. A spokesperson for Arizona State University, which would have housed the Arizona site, told Politico that “the planned facility reflects a commitment on the scale of a new national laboratory” and “achieving that national vision depends on federal support.”

The original vision for Natcast

The Biden administration envisioned Natcast as a public-private consortium built to last for multiple decades and pursue long-term programs to support the U.S. semiconductor industry. The plan for the NSTC, as codified in the CHIPS and Science Act, includes research, workforce training programs, and an investment fund to help startup companies commercialize new technologies.

Some cited imec, a Belgium-based semiconductor and nanotech research hub, as an inspiration for Natcast. Imec is a nonprofit with semiconductor facilities, thousands of employees, and a billion-dollar annual budget. It began in 1984 as fully government-funded, but as of 2024, it received 75% of its budget from industry.

The CHIPS and Science Act’s mandate for a five-year program with $7 billion would not be enough on its own to establish U.S. semiconductor leadership, sources said.

“There was the recognition that, over time, it had to generate enough value that it would be self-sustaining without government funding,” said a former member of the Industrial Advisory Committee.

Part of the idea behind creating Natcast as an independent body, they added, was to maintain focus on longer-term research agendas and keep the organization “separated from the vagaries of annual government funding.”

One former Commerce official said the U.S. is missing its opportunity to create its version of imec.

“Pretty much every major silicon network company participates in the imec consortium… because that’s where that sort of pre-competitive research gets done, which is wonderful, except it’s not in the U.S.,” they said. “There’s been pockets of it, if you look here and there… but there’s not that sort of scale for open, collaborative research in this country.”

They also expressed doubt about whether the current plan for the NSTC would align with the CHIPS and Science Act.

“I think people in government will have to take a look at that, in terms of, is what’s going on now consistent with the statute,” the former official said. “I don’t think anyone really knows what’s going to happen.”

Disputing Natcast’s legality

In his clawback announcement, Lutnick pointed to the Department of Justice’s published opinion that Natcast’s creation violates federal law. The opinion, written in response to a request from the Department of Commerce, concludes that the creation of Natcast violated the Government Corporation Control Act by establishing a corporation to “act as an agency” without being specifically empowered to do so by a law. The opinion acknowledges that DOJ “suggested informally” to the Biden administration that the plan for Natcast was in compliance with the GCCA, but says the legal reasoning behind that advice was flawed.

Because Natcast’s creation violated the GCCA, Lutnick wrote, the funding agreement between Natcast and the administration “has no legal force or effect” and “the department will not abide by its terms.”

In particular, Lutnick criticized Natcast’s board of trustees and the committee that selected the board because some members had previously held positions within the Biden administration, including in the Commerce Department or as a member of an independent advisory committee for the department.

Lutnick also said the funding agreement between the Commerce Department and Natcast would “tie future administrations’ hands” by requiring the department to issue payments annually and whenever Natcast meets certain milestones, and by limiting the department’s authority to terminate the agreement.

Since Natcast’s founding, members of both the Biden and Trump administrations had argued that the department did not have enough control over the nonprofit, one source said. But others overseeing Natcast believed the department had too much control. One former member of the board pointed to the Commerce Department having veto authority over all of Natcast’s programs as an example of excessive oversight that would have hampered the nonprofit.

“I think people would still be okay with administering the program differently, with a lighter touch or more direct government involvement. But what’s happened now is, everyone in industry invested multiple years of engagement, only to have it go away,” a former Commerce official said. “So starting from scratch and saying, ‘We’re going to do something completely different,’ I think a lot of people are just going to decide not to engage.”