$52.7 billion is being made available for chip manufacturing and development—under certain conditions.
On August 9, President Biden signed into law the CHIPS and Science Act of 2022 (the CHIPS Act), making available $52.7 billion in funding for chipmakers to create facilities to research, manufacture, and produce semiconductors and semiconductor-related materials and equipment. But while the industry considers this a win, there are strings attached to the funding.
The Act funds not only semiconductor production itself, but also related activities such as workforce training, chip design and packaging. CHIPS is mostly focused on cutting-edge chips that power artificial intelligence and other supercomputing activities, although there are some provisions for legacy chips. Much of the funding—about $19 billion—will be released in the next 12 months to immediately ramp up chip manufacturing in the U.S. The legislation also provides a 25 per cent investment tax credit for capital expenses for manufacturing semiconductors and related equipment.
The CHIPS Act provides $11 billion over five years to boost research and development. This includes funding increases for the Department of Energy’s Office of Science, the National Science Foundation and the National Institute of Standards and Technology. And while NASA doesn’t get any new money, the Act sets new policies for that organization to succeed in a changing space sector, including extending support for the International Space Station through 2030 and reorganizing the Artemis program.
Some analysts think the legislation takes significant steps in shoring up American chip production and preventing a showdown with China. “We don’t need to have all chips or a very significant number of chips made in the U.S.,” Sourabh Gupta, senior Asia-Pacific policy specialist at the Institute for China-America Studies, told NPR. “We just need a certain amount of chips which will not hold the U.S. in a situation of blackmail or in a situation of peril if there is a war in East Asia, or if there are other supply chain snafus.”
The funding does come with some strings attached—and the strings are held by the Secretary of Commerce. If a company or consortium that receives funding engages in any joint research or technology licensing with a foreign entity considered a security risk that raises national security red flags, the Secretary is directed by law to claw back the funding. These entities include all companies that fall under the jurisdiction of China, Russia, and Iran as well as other sanctioned parties. The funding recipient would likely have to get clearance from the Secretary for any potential research and licensing efforts before agreeing to them.
In addition, funding recipients have to sign a 10-year agreement with the Secretary that they will not engage in expanding semiconductor manufacturing capacity in China or other country of concern. There are some exceptions for the expansion of legacy chip manufacturing facilities serving markets in those countries. Violating that agreement could also result in the Secretary reclaiming all of the funding provided.
While they’ll clearly benefit from an influx of money, CHIPS funding recipients may also find themselves under closer oversight from Congress and the White House. They may also find themselves the subjects of increased interest by those very governments and entities the legislation is trying to help the U.S. compete with. These actors may try to engage in corporate espionage to steal proprietary technologies.
American chip manufacturing has dwindled from 37 per cent in 1990 to 12 per cent currently, according to the Semiconductor Industry Association. Global competitors like China have offered significant manufacturing incentives to encourage chip production in those countries. With the CHIPS Act, the U.S. is responding with incentives of its own.
The Semiconductor Industry Association anticipates that the CHIPS Act funding will help create hundreds of thousands of American jobs, attract hundreds of billions of dollars in chip company investments in the U.S., and help safeguard more resilient chip supply chains for manufacturing and national security sectors in the country.
Since Biden signed the Chips Act, Micron has announced a $40 billion investment in chip manufacturing, and Qualcomm and GlobalFoundries announced a new partnership to expand GlobalFoundries’ chipmaking facility in New York.
