ASG Analysis: The CHIPS Act Ushers in a New Era for U.S. Industrial Policy Amid Major Challenges
- The Creating Helpful Incentives to Produce Semiconductors and Science Act, better known as the CHIPS and Science Act, was signed into law by President Biden on August 9, 2022. The bill aims to shore up U.S. semiconductor manufacturing capacity by providing attractive incentives and funding for R&D and workforce development. The act is motivated primarily by China-related national security concerns, as well as the United States’ continuing reliance on South Korea and Taiwan for cutting-edge semiconductors.
- The bill includes more than $50 billion in appropriations for chip manufacturing and R&D. The Department of Commerce will oversee the disbursement of these funds over the next five years, including $39 billion for building, expanding, and modernizing domestic production facilities and equipment, and $11 billion for advanced semiconductor R&D (see appendix for granular breakdowns).
- The Biden administration is keen to show progress on implementation as soon as possible. Commerce has established two new offices within the National Institute of Standards and Technology – the CHIPS Program Office (CPO) and the CHIPS R&D Office – to oversee progress. The CPO has already released a public consultation seeking feedback on the design and implementation of CHIPS incentive programs, and Commerce recently appointed 24 experts to the industrial advisory committee.
- The implementation process will proceed in several stages and cover different groups of companies. Priority will initially be given to legacy technology companies and projects in order to upgrade older facilities and equipment. Applications from larger companies such as TSMC, Intel, Samsung, and Micron will likely take more time as they will receive more funding, requiring greater scrutiny and longer approval processes. Nevertheless, these four companies have already announced plans to upgrade or build U.S.-based facilities in anticipation of receiving CHIPS money.
- The Commerce Department hopes to begin accepting applications for CHIPS-funded projects as soon as February 2023, though there is limited publicly available guidance on how to prepare. Companies that plan to apply will, however, need to demonstrate significant commitment to the U.S. semiconductor ecosystem and specifically to workforce development, including through providing opportunities for small businesses and disadvantaged communities.
- Key questions remain related to implementation, funding, and sustainability. At present, there is significant concern over the long-term commitment to funding and how initial funds will be separated – for example, how much of the initial funding will go to companies in the upstream and downstream subsectors of the industry.
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