By Alexandra Alper and Nichola Groom
WASHINGTON, Sept 4 (Reuters) - A Tennessee factory that Washington had hoped to protect as part of a push to safeguard the U.S. semiconductor supply chain is at risk of closure after the Trump administration's new trade measures drove away its two remaining customers, according to sources familiar with the matter.
Germany's Wacker Chemie, which produces polysilicon that goes into chips and solar panels, will make a decision in the coming weeks on whether to close
its Charleston, Tennessee, facility, which employs about 600 workers, the sources said.
Reuters was not able to confirm the names of the two customers.
The move follows a White House proclamation last month that seeks to incentivize purchases of American polysilicon, the sources said, declining to be named because the matter was not public.
Wacker did not comment on the loss of customers or potential plant closure. It said it was too soon to assess the policy's impact on its business but noted the proclamation "does not, as it reads now, effectively support the use of U.S. made polysilicon."
The company also said it was in active discussions with the administration about ways to achieve the policy's goal of protecting domestic producers.
The dilemma, not previously reported, is the latest example of a Trump trade policy failing to help one of the industries it had sought to aid. Steel and aluminum tariffs raised costs for U.S. automakers, damaging their ability to compete with imports until additional measures were taken.
It also raises questions about whether the Trump administration can protect the U.S. chip supply chain from Chinese supremacy, as Chinese firms, long dominant in solar-grade polysilicon, have made inroads into the market for the more refined semiconductor-grade variety.
The Coalition for a Prosperous America, which advocates for tariffs and industrial policies, argues the implementing rules for the trade measures, which take effect in December, should reward purchases of U.S.-made polysilicon, noting only two companies produce the material domestically.
"Without a clear signal that domestic polysilicon will be the foundation of both the solar and semiconductor supply chains, we risk ceding both to foreign competitors and adversarial nations like China," said Nick Iacovella, a spokesperson for the group. "That is a direct national security threat."
Commerce did not respond to requests for comment. A Trump administration official said the government "continues to engage with industry stakeholders" to inform its strategy on reshoring polysilicon manufacturing.
The trade measures, announced August 6, include a price floor and a tariff on inbound polysilicon ingots, wafers, cells and solar panels.
But they apply equally to products made abroad with polysilicon from anywhere, treating Chinese and American-origin materials the same. That maintains the disadvantage for American polysilicon, which can cost four times more, according to market research firm Bernreuter Research.
"We don't expect the Section 232 tariffs, as currently structured, to boost demand for U.S. polysilicon," said Elissa Pierce, a Wood Mackenzie research analyst.
The measure was welcomed by foreign rival United Solar Polysilicon, an Oman-based company with China ties.
Hemlock Semiconductor, the only other U.S. producer, is more insulated from the policy since its owner, Corning, purchases its solar-grade polysilicon to produce wafers domestically.
Still, the proclamation authorizes Commerce to offer incentives for companies that invest in U.S. polysilicon production, but they must be negotiated on a company-specific basis.
Munich-based Wacker's German and American operations have been struggling with Chinese competition. Wacker cut jobs at the $2.5 billion Charleston plant last year, and CEO Christian Hartel warned investors days before the proclamation that the company could have "one plant too many" if the expected trade action was not beneficial.
(Reporting by Alexandra Alper and Nichola Groom; editing by Chris Sanders and Nick Zieminski)
