The U.S. CHIPS Act: What it Means for the Semiconductor Industry
By Andy Keiser
August 17, 2022
To help secure the semiconductor supply chain for the United States, the U.S. Congress and Biden Administration have embarked on a multifaceted effort to incentivize private industry to reshore or near shore semiconductor (chips) manufacturing. The first iteration of the CHIPS Act was included in the Fiscal Year 2021 Defense Authorization Act, which authorized, but did not appropriate, more than $50 billion in incentives targeting semiconductor manufacturing in the United States.
Below is a summary of the CHIPS Act and how the program is expected to be rolled out. You may also watch a short overview video about the CHIPS Act here.
CHIPS for America Fund
- $39 billion in financial assistance to build, expand, or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging, or research and development. This program of manufacturing incentives will be run by the Commerce Department.
- $11 billion in Department of Commerce research and development (R&D) funding.
- Creates a public/private National Semiconductor Technology Center.
- Creates a Department of Commerce R&D program to strengthen advanced assembly, test, and packaging (ATP) capabilities.
CHIPS for America Defense Fund
- $2 billion for the Department of Defense to implement a national network for onshore, university-based prototyping, lab-to-fab transition of semiconductor technologies.
CHIPS for America International Technology and Security Fund
- $500 million for the Department of State to support the development of trusted telecommunications technologies, semiconductors, and other emerging technologies.
Public Wireless Supply Chain Innovation Fund
- $1.5 billion through the National Telecommunications and Information Administration to spur development of open radio access networks or O-RAN.
CHIPS for America Workforce and Education Fund
- $200 million to support the domestic semiconductor workforce through the National Science Foundation.
Advanced Manufacturing Investment Tax Credit (ITC)
- ITC provides a 25% investment tax credit for investments in semiconductor manufacturing.
Department of Commerce Technology Hubs
- Authorizes $11 billion to fund 20 geographically-distributed technology hubs.
National Science Foundation Authorization
- Authorizes $81 billion for the NSF over five years, $36 billion over the current funding levels.
National Institute of Standards and Technology (NIST) Authorization
- Authorizes $9 billion for NIST over five years, $4 billion more than current funding levels.
Department of Energy Office of Science
- Authorizes $50.3 billion for the Office of Science, $12.9 billion over current funding levels.
Department of Energy Science and Innovation Provisions
- Authorizes $17.6 billion in new spending for energy security, clean technology transfer, microelectronics, University nuclear infrastructure, advanced nuclear technologies, low-emission steel, applies laboratory infrastructure, and applied energy R&D.
- The legislation contains a prohibition for recipients of the funding or incentives from using the funding to manufacture in countries of concern like China.
WHAT TO LOOK FOR NEXT
- Companies should be able to access the tax provisions this year in 2022, including the refundable tax credits and the ITC.
- Each of the programs that have appropriated funds (first section) will begin to roll out requests for information and potentially requests for proposals as they promulgate the rules and regulations that will cover each of the programs described above. The Departments of Commerce, Energy, State and Defense have work ahead as they roll out and begin to implement the programs in their area later this year and into next.
- The majority of the funding in this bill is an authorization (budget authority) on the science side but not an appropriation (actual dollars). Look for Congress to begin to fund many if not all these programs at some level in Fiscal Year 2023. Most observers expect a continuing resolution by September 30, 2022 (or two) and an omnibus appropriations measure mid-to-late December.
For more information about whether your company or organization may qualify for U.S. CHIPS Act funding, as well as assistance with developing your pursuit strategy, please contact Andy Keiser through the link below.