And how you can prepare to capture the opportunities it presents.
The CHIPS for America Act is poised to provide significant opportunities for semiconductor organizations. Additional guidance from the Departments of Commerce and Defense is needed around the application process for the program, but there are steps semiconductor organizations can take now to prepare.
Below is an overview of the CHIPS Act, and steps companies can take now to prepare.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act intends to address the chip shortage by offering about $52 billion in subsidies and incentives to expand domestic semiconductor production. The bulk of the funding is $39 billion in grants and loans to encourage the construction or expansion of semiconductor fabrication, packaging or R&D facilities.
Another $11 billion is allocated in grants for semiconductor-related R&D programs, including a National Semiconductor Technology Center, National Advanced Packaging Manufacturing Program, Manufacturing USA Semiconductor Institute within the National Institute for Standards & Technology (NIST), and Microelectronics R&D within NIST.
The remainder of the funding allocated thus far also includes:
- $2 billion in grants for the Department of Defense to develop a Microelectronics Commons
- $1.5 billion in grants for a Public Wireless Supply Chain Innovation Fund at the National Telecommunications and Information Administration (NTIA)
- $200 million in grants for a semiconductor workforce and education initiative
Private firms and public institutions involved in the construction, expansion and modernization of fabrication plants will be eligible for a federal grant not to exceed $3 billion per project, without a waiver.
New Advanced Manufacturing Investment Tax Credit
The provision also creates a 25 percent tax credit for investments in semiconductor manufacturing as well as for the manufacturing of the specialized tooling equipment required in the semiconductor manufacturing process.
Taxpayers may elect to treat the credit as a payment against tax versus receiving it as a refund, and the credit is provided for property that is placed in service after December 31, 2022, and for which construction begins before January 1, 2027.
Regional Technology Hubs
The bill would also direct the Department of Commerce to designate at least 20 Regional Technology Hubs with at least three per EDA region. Proposed funding for these regional hubs is $50 million for the strategy program and $9.95 billion for implementation awards over five years.
National Science Foundation (NSF) Directorate for Technology, Innovation and Partnerships (TIP)
The bill formally authorizes the new TIP Directorate and Regional Innovation Engines programs, which NSF already launched earlier this year. The authorization level for TIP Would increase from $1.5 billion in FY23 to $4.1 billion in FY27. TIP’s activities would be guided by both five national challenges and 10 key technology focus areas, with the list for year one provided in the bill. Other notable initiatives authorized to TIP include Translation Accelerator awards to tech commercialization consortia, Test Bed funding, and Entrepreneurial Fellowships.
NIST Manufacturing Programs
The bill increases the annual authorization level for the Manufacturing Extension Partnership (MEP) to $550 million by FY25 and to $250 million by FY27 for the Manufacturing USA Semiconductor Institute.
Clean Energy Innovation Programs
The bill also contains multiple authorizations for new programs and initiatives related to innovation within the clean energy and energy efficiency sectors.
How Semiconductor Organizations Can Prepare
Semiconductor organizations should study the contents of the programs and be prepared to act as soon as the application process opens, which according to the Department of Commerce will happen by February 2023. It is likely the process will require a combination of company financial, corporate and legal entity information as well as a detailed proposal for the proposed project for which they’re applying for funding. Companies must also obtain agreements for state and local incentives that need to be included in their federal applications. We believe that companies should immediately begin to pull together key corporate and project information and communicate with state and local officials as these funds will be competitive.
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Written by Tom Stringer and Hitseh Shah. Copyright © 2022 BDO USA, LLP. All rights reserved. www.bdo.com