Written by Oded Kadosh, Guy Milhalter, and Austin Ochoa
An Overview of the CHIPS and Science Act
Earlier this summer, President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act into law. The CHIPS and Science Act provides $52.7 billion for U.S. semiconductor research, development, and manufacturing.[1] Specifically, the CHIPS and Science Act authorizes the allocation of the following funds:
- $39 billion in manufacturing incentives for the semiconductor industry;
- $2 billion for the legacy chips used in automobiles and defense systems;
- $1.5 billion for promoting and deploying wireless technologies that use open and interoperable radio access networks;
- $13.2 billion in R&D and workforce development; and
- $500 million to provide for information communications technology security and semiconductor supply chain activities.[2]
Additionally, the CHIPS and Science Act provides a 25% investment tax credit for qualified investments in buildings and other eligible depreciable tangible property for advanced manufacturing facilities that have a primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment.[3] The tax credit is available for projects that start construction between January 1, 2023, and December 31, 2026.
According to the White House, the CHIPS and Science Act will “strengthen American manufacturing, supply chains, and national security, and invest in research and development, science and technology, and the workforce of the future” to stay competitive in the industries of nanotechnology, clean energy, quantum computing, and artificial intelligence.[4]
Funding Eligibility Requirements
The U.S. Department of Commerce recently announced its implementation strategy, outlining the initiatives, goals, and guardrails guiding the CHIPS for America Fund to be created under the new law, which includes funding eligibility requirements.[5]
To be eligible for funding under the CHIPS and Science Act, an applicant must be a “covered entity,” which can be:
“A private entity, a nonprofit entity, a consortium of private entities, or a consortium of nonprofit, public, and private entities with a demonstrated ability to substantially finance, construct, expand, or modernize a facility relating to fabrication, assembly, testing, advanced packaging, production, or research and development of semiconductors, materials used to manufacture semiconductors, or semiconductor manufacturing equipment.”[6]
CHIPS funding must be used for facilities built in the U.S. and cannot support facilities being constructed or operated abroad.[7]
Domestic companies and foreign companies, except those that are considered a “foreign entity of concern,” that seek to use CHIPS funding for qualifying investments in the U.S. can be eligible.
A “foreign entity of concern” is, among other things, a foreign entity that is “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation.” Currently, covered nations include North Korea, China, Russia, and Iran.
Thus, if an applicant (i) is not a “foreign entity of concern,” and (ii) uses CHIPS funding for facilities built in the U.S. then it will likely be eligible for funding.
How to Apply
Funding documents, which provide specific application guidance, will be released by February 2023. According to the Department of Commerce, funding will be given on a rolling basis as soon as applications can be processed, evaluated, and negotiated.
[1] Fact Sheet: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Counter China.
[5] CHIPS for America Strategy (September 6, 2022).
