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UNDERSTANDING THE CHIPS ACT: HOW IT IMPACTS THE SEMICONDUCTOR INDUSTRY

The U.S. CHIPS and Science Act is designed to strengthen the domestic semiconductor supply chain with federal subsidies similar to those offered by other governments. The Act provides a 25% tax credit for U.S. facilities that produce semiconductors or chipmaking equipment and $52 billion in funding for new semiconductor programs. The National Semiconductor Technology Center (NSTC), Advanced Packaging program and complementary programs from the Act will help advance chip industry innovations that will enable life-changing technologies to better the lives of people around the world.

The CHIPS Program, which was authorized in 2022 as part of the CHIPS and Science Act, is comprised of two separate components. The first is a $39 billion incentive program to attract the large-scale investment required for reversing the long decline of America’s preeminence in semiconductor production. The second is an $11 billion effort aimed at creating a research and development ecosystem that will sustain long-term U.S. strategic growth by ensuring that the nation remains the global leader in developing new semiconductor technologies.

The Department of Commerce (DOC), through the CHIPS Program Office (CPO), issued its first Notice of Funding Opportunity (NOFO) under the CHIPS Incentive Program on February 28, 2023. The NOFO is specifically intended to support the “construction, expansion, or modernization of commercial facilities for the front- and back-end fabrication of leading-edge, current-generation, and mature-node semiconductors.” Subsequent NOFOs focused on semiconductor materials suppliers and equipment manufacturers and research and development facilities are expected in the late spring and fall, respectively.

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DEPARTMENT OF COMMERCE CHIPS PROGRAM OFFICE PRESENTATION

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PROGRAM PRIORITIES

As articulated by Secretary of Commerce Gina Raimondo in a speech on February 23, the Administration views the CHIPS Program as a mechanism for ensuring America’s long-term capacity to develop and manufacture technologies that are foundational to its economic vitality and, most importantly, its national security. Semiconductors are that foundational technology because they are essential to military superiority (e.g., weaponry, drones, and satellites) and daily life (e.g., autos, phones, and medical devices).

The overall vision for the CHIPS Program espoused by Secretary Raimondo is reflected in the six evaluative criteria that CPO will use in determining whether an application merits CHIPS funding. These criteria are as follows:

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Economic & National Security

Economic & National Security

This criterion is explicitly considered of primary importance and will receive the greatest weight during the application review process. Specific foci include strengthening supply chain resilience, meaningfully increasing U.S. semiconductor production, and meeting government needs for safe, secure, and domestically produced chips.

 

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Commercial Viability

Commercial Viability

This criterion focuses on the applicant’s demonstrated understanding of future demand for existing and potential customers.

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Financial Strength

Financial Strength

Successful applications will include plans for incentivizing strong private sector investment in the project, with the goal of helping these facilities to be viable without further government assistance. Ultimately, one of the goals of the CHIPS Program is to make subsidies unnecessary in the long run.

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Technical Feasibility & Readiness

Technical Feasibility & Readiness

The emphasis in this criterion is balancing creativity with feasibility through a strong project execution plan.

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Workforce Development

Workforce Development

The implementation of the CHIPS Program is intended to serve as a catalyst for spurring the development of a new high-skilled workforce comprised of both college-educated and vocationally trained scientists, engineers, and technicians. Absent such an effort, it is estimated that there will be a shortfall of roughly 90,000 positions in fab operations alone by 2030.

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Broader Impacts

Broader Impacts

The CHIPS Program is committed to leveraging its resources to build strong communities around funded projects. To that end, applications must address how projects will provide positive impacts beyond an increased manufacturing capacity.

FUNDING INFORMATION

The CHIPS Incentive Program has up to $38.22 billion available in direct funding to support awards made through this NOFO, with these funds accounting for 5 15 percent of total capital expenditures for any given project. CPO does not anticipate that the entirety of those funds will be dispersed through this opportunity alone and expects that funding will be available through future opportunities. Additionally, the Program has up to $75 billion in direct loan or guaranteed principal. Taken together, total CHIPS incentives are expected to account for no more than 35 percent of total project capital expenditures

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CHIPS ACT APPLICATION PROCESS

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Support for CHIPS Act funding applications with expert workforce development support

The SEMI Foundation, recognized as a strategic workforce development partner by the National Institute of Standards and Technology/Department of Commerce, is providing contract tailored support and expert guidance in developing workforce development plans and equity strategies for applications. Fulfill CHIPS Act programmatic requirements through our strategic partnerships and initiatives. Leverage our expertise as a "backbone organization" to support your sectoral partnership and maximize your chance of success. 

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SOURCES AND ADDITIONAL INFORMATION