July 29, 2022 – Both the Senate and House this week passed the Chips Act of 2022 (H.R. 4346) by comfortable bi-partisan margins, sending it to the desk of President Joseph Biden for signature and enactment. The Act seeks to address that fact that only about 12% of semiconductor ships are currently manufactured in the United States and provides appropriations to develop domestic manufacturing critical to U.S. competitiveness and national security interests.
The Act provides $52.4 billion in funding under the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund authorizing activities by the Departments of Commerce (DOC), Defense (DoD), and State (DOS) to develop onshore domestic manufacturing of semiconductors. It also provides funding to accelerate development of an open-architecture model (known as OpenRAN) to shore up the global telecommunications supply chain and advance the U.S. mobile broadband market. To ensure that these manufacturing incentives advance U.S. technology and supply chain security, the Act requires that any recipient of Federal financial assistance join an agreement prohibiting certain material expansions of semiconductor manufacturing in China or in other countries of concern.
The Act offers advanced manufacturing investment tax credit (ITC) to companies of 25% of their qualified investment for each taxable year in semiconductor manufacturing. The credit will cover manufacturing equipment, the construction of semiconductor manufacturing facilities, and incentives for the production of specialized tooling equipment required in the semiconductor manufacturing process. Further, the Act includes safeguards to ensure that recipients of an ITC do not build such semiconductor production facilities in countries that present a national security concern.
In addition, the Act provides significantly increased funding for scientific research and development for the National Science Foundation (NSF), the Department of Commerce (DOC), the National Institute of Standards and Technology (NIST), the National Aeronautics and Space Administration (NASA), and the Department of Energy (DOE), in the amount of nearly $170 billion. This increase in research funding includes efforts to build new technology hubs across the United States and efforts to protect U.S. investment in these sectors by identifying and combatting illegal foreign efforts to compromise or obtain U.S. research products.