The Trump administration, seizing upon supply chain shortages resulting from the ongoing COVID-19 pandemic, has turned its sights to ending the United State's reliance on Asia for the manufacture of semiconductor technologies, despite warnings that such action could damage U.S. leadership in the market.

To this effect, The Wall Street Journal reports that White House officials have entered into talks with Intel and the Taiwan Semiconductor Manufacturing Company (TSMC) to build foundries in the United States. According to the report, these efforts are largely fueled by the administrations' concerns over the U.S. reliance on Taiwan, which while self-governing is embroiled in a decades-long territorial dispute with China that claims sovereignty over the island nation.

Intel, in a statement provided to SDxCentral, acknowledged that it was working with the U.S. government to explore ways to strengthen the domestic manufacturing of semiconductors and associated technologies.

"As the largest U.S.-owned manufacturer of semiconductors, Intel is well positioned to work with the U.S. government to operate a U.S.-owned commercial foundry and supply a broad range of secure microelectronics," the statement read.

“We think it’s a good opportunity,” Greg Slater, Intel’s VP of policy and technical affairs, told the WSJ. “The timing is better and the demand for this is greater than it has been in the past, even from the commercial side.”

Meanwhile, in a statement reported by the WSJ, TSMC expressed an openness to building a U.S. plant, but said there was no concrete plan at this time.

However, the Trump administration appears to be motivated less by a desire to secure U.S. supply chains and instead by efforts to deny China access to U.S. intellectual property, according to a recent report from Boston Consulting Group. The report explored the potential consequences unilateral actions taken by the Trump administration to restrict access to U.S. technology could have on the global semiconductor market.

"The U.S. has long been the global semiconductor leader with 45% to 50% share," the report reads. However, any attempt to restrict access to these technologies could threaten that market dominance and damage U.S. interests, BCG contends.

And the analyst group makes the case that the existing trade war, if allowed to continue, could have a devastating effect on U.S. chipmakers.

"Over the next three to five years, U.S. companies could lose 8 percentage points of global share and 16% of revenues if the U.S. maintains the restrictions enacted with the current entity list," the report reads.

And if the U.S. were to completely ban semiconductor companies from selling to Chinese customers — in effect causing a "technology decoupling from China" — the BCG report warns U.S. companies could see revenues decline by as much as 37%.

Further, BCG makes the case that such action is unlikely to have the desired effect as "established alternative, non-U.S. suppliers exist already for over 70% of Chinese semiconductor demand," and the country is expected to reach semiconductor self-sufficiency by 2025.

The findings of the report were explored by experts from Moor Insights and Strategy, Worthman and Associates, and Omdia Research during a Huawei sponsored panel moderated by RCR Wireless News last week.

Speaking to the consequences outlined in the BCG report, Will Townsend, senior analyst of networking infrastructure and carrier services at Moor Insights and Strategy, said, "If legislation moves forward to license companies like TSMC that will definitely adversely impact the revenue pool."

China won't scrape by unscathed while U.S. companies are left to suffer, says Townsend, adding that 2025 is a long time for China to build up its semiconductor infrastructure.

But while estimates put China five years out for semiconductor independence, Michael Yang, senior director of memory at Omdia, says China is less than three years away on the memory front, and alongside the U.S., China already represents a significant source of demand in the memory industry.

Ernest Worthman, principal analyst at Worthman and Associates, however, sees the Trump administration's motives as purely emotional.

"The position this administration is taking is really just personal. They just don't want to do business with China right now," he said, adding that the pandemic isn't doing the already bruised semiconductor industry any favors either.

The BCG report found that since the start of the trade war with China, "the median year-on-year revenue growth of the top 25 U.S. semiconductor companies has plummeted from 10% in the four quarters immediately prior to the implementation of the first rounds of tariffs in July 2018, to approximately 1% in late 2018."

The U.S. stands a "high likelihood" of losing its leadership position in the semiconductor space if the situation is allowed to continue, said Worthman. "Any double-digit loss in the semiconductor industry is going to be terrible"

However, Worthman notes that the numbers are ever-changing and there remains a lot of uncertainty, not the least of which is how the November election will change the U.S. relationship with China.

"If the administration changes there is going to be a completely different landscape starting next year," he said.