$280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States,

 The CHIPS and Science Act is a U.S. federal statute enacted by the 117th United States Congress and signed into law by President Joe Biden on August 9, 2022. The act authorizes roughly $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States, for which it appropriates $52.7 billion.[1][2][3] The act includes $39 billion in subsidies for chip manufacturing on U.S. soil along with 25% investment tax credits for costs of manufacturing equipment, and $13 billion for semiconductor research and workforce training, with the dual aim of strengthening American supply chain resilience and countering China.[4][5]: 1  It also invests $174 billion in the overall ecosystem of public sector research in science and technology, including in NASA, the DOE, and NIST.[6][7][8]

The act does not have an official short title as a whole but is divided into three divisions with their own short titles: Division A is the CHIPS Act of 2022 (where CHIPS stands for "Creating Helpful Incentives to Produce Semiconductors"); Division B is the Research and Development, Competition, and Innovation Act; and Division C is the Supreme Court Security Funding Act of 2022.[9]

History[edit]

The CHIPS and Science Act combines two bipartisan bills: the Endless Frontier Act,[10] designed to boost investment in domestic high-tech research, and the CHIPS for America Act,[11] designed to bring semiconductor manufacturing back to the U.S. The act is aimed at competing with China.[12]

The Endless Frontier Act was initially presented to Senators Chuck Schumer (D-NY) and Todd Young (R-IN) by Under Secretary of State Keith Krach in October 2019, as part of the Global Economic Security Strategy to boost investment in high-tech research vital to U.S. national security.[13][14] The plan was to grow $150 billion in government R&D funding into a $500 billion investment, with matching investments from the private sector and a coalition of technological allies dubbed the "Techno-Democracies-10" (TD-10).[15][14] On May 27, 2020, Senators Young and Schumer, along with Congressmen Ro Khanna (D-CA) and Mike Gallagher (R-WI.), introduced the bipartisan, bicameral Endless Frontier Act to solidify the United States' leadership in scientific and technological innovation through increased investments in the discovery, creation, and commercialization of technology fields of the future.[16]

The United States Innovation and Competition Act of 2021 (USICA) (S. 1260), formerly known as the Endless Frontier Act, was United States legislation sponsored by Senate Majority Leader Chuck Schumer and Senator Young authorizing $110 billion for basic and advanced technology research over a five-year period. Investment in basic and advanced research, commercialization, and education and training programs in artificial intelligence, semiconductors, quantum computing, advanced communications, biotechnology and advanced energy, amounts to $100 billion. Over $10 billion was authorized for appropriation to designate ten regional technology hubs and create a supply chain crisis-response program.[17]

The CHIPS for America Act portion stemmed from Under Secretary of State Krach and his team brokering the $12 billion on-shoring of TSMC (Taiwan Semiconductor Manufacturing Company) to secure the supply chain of sophisticated semiconductors, on May 15, 2020.[18][19][20] Krach's stated strategy was to use the TSMC announcement as a stimulus for fortifying a trusted supply chain by attracting TSMC's broad ecosystem of suppliers; persuading other chip companies to produce in U.S., especially Intel and Samsung; inspiring universities to develop engineering curricula focused on semiconductor manufacturing and designing a bipartisan bill (CHIPS for America) to provide the necessary funding.[21] This led to Krach and his team's close collaboration in creating the CHIPS for America component with Senators John Cornyn (R-TX) and Mark Warner (D-VA).[22] In June 2020, Senator Warner joined U.S. Senator John Cornyn in introducing the $52 billion CHIPS for America Act.[23]

Both bills were eventually merged into the U.S. Innovation and Competition Act (USICA). On June 8, 2021, the USICA passed 68–32 in the Senate with bipartisan support. The House version of the Bill, America COMPETES Act of 2022 (H.R. 4521), passed on February 4, 2022. The Senate passed an amended bill by substituting the text of H.R. 4521 with the text of the USICA on March 28, 2022. A Senate and House conference was required to reconcile the differences, which resulted in the bipartisan CHIPS and Science Act, or "CHIPS Plus".[24] The bill passed the U.S. Senate by a vote of 64–33 on July 27, 2022.[25] On July 28, the $280 billion bill passed the U.S. House by a vote of 243–187–1.[26] On August 1, 2022, the magazine EE Times (Electronic Engineering) dubbed Under Secretary of State Keith Krach (as of February 2023, now the current Chairman of the Krach Institute for Tech Diplomacy at Purdue University) the architect of the CHIPS and Science Act.[21] The bill was signed into law by President Joe Biden on August 9, 2022.[27]

Background and provisions[edit]

The bill constitutes an industrial policy initiative which takes place against the background of a perceived AI Cold War between the US and China, as artificial intelligence technology relies on semiconductors.[28] The bill was considered amidst a global semiconductor shortage and intended to provide subsidies and tax credits to chip makers with operations in the United States. The U.S. Department of Commerce was granted the power to allocate funds based on companies' willingness to sustain research, build facilities, and train new workers.[29]

For semiconductor and telecommunications purposes, the CHIPS Act designates roughly $106 billion. The CHIPS Act includes $39 billion in tax benefits and other incentives to encourage American companies to build new chip manufacturing plants in the U.S.[30] Additionally, $11 billion would go toward advanced semiconductor research and development, separable into $8.5 billion of that total going to the National Institute for Standards and Technology, $500 million of the $11 billion to Manufacturing USA, and $2 billion of the former to a new public research hub called the National Semiconductor Technology Center. $24 billion would go to a new 25 percent advanced semiconductor manufacturing tax credit to encourage firms to stay in the United States, and $200 million would go to the National Science Foundation to resolve short-term labor supply issues.[6][31]

According to McKinsey, "The CHIPS Act allocates $2 billion to the Department of Defense to fund microelectronics research, fabrication, and workforce training. An additional $500 million goes to the Department of State to coordinate with foreign-government partners on semiconductor supply chain security. And $1.5 billion funds the USA Telecommunications Act of 2020, which aims to enhance competitiveness of software and hardware supply chains of open RAN 5G networks."[6][31] Companies are subjected to a ten-year ban prohibiting them from producing chips more advanced than 28-nanometers in China and Russia if they are awarded subsidies under the act.[32]

The act authorizes $174 billion for uses other than semiconductor and telecom technologies.[6][7] It authorizes, but does not appropriate, extended NASA funding for the International Space Station to 2030, partially funds the Artemis program returning humans to the Moon, and directs NASA to establish a Moon to Mars Program Office for a human mission to Mars beyond the Artemis program. The bill also obligates NASA to perform research into further domesticating its supply chains and diversifying and developing its workforce, reducing the environmental effects of aviation, integrating unmanned aerial vehicle detection with air traffic control, investigating nuclear propulsion for spacecraft, continuing the search for extraterrestrial intelligence and xenology efforts, and boosting astronomical surveys for Near-Earth objects including the NEO Surveyor project.[1][33]

The bill could potentially invest $67 billion in accelerating advanced zero-emissions technologies (such as improved energy storage, hydrogen economy technologies, and carbon capture and storage) to mass markets, advancing building efficiency, and improving climate science research, according to the climate action think tank Rocky Mountain Institute. The bill would invest $81 billion in the NSF, including new money for STEM education and defense against foreign intellectual property infringement, and $20 billion in the new Directorate for Technology, Innovation, and Partnerships, which would be tasked with deploying the above technologies, and authorizes but does not appropriate $12 billion for ARPA-E.[8] It contains annual budget increases for the United States Department of Energy for other purposes including supercomputer, nuclear fusion and particle accelerator research, and directs the United States Department of Commerce to establish $10 billion worth of research hubs in post-industrial, mostly rural economies.[6][7]

Support[edit]

Many legislators and elected officials from across both the federal government and various state governments endorsed the passage. A large group of governors consisting of Pennsylvania's Tom Wolf, Alabama's Kay Ivey, California's Gavin Newsom, Kentucky's Andy Beshear, Michigan's Gretchen Whitmer, Wisconsin's Tony Evers, Illinois' J. B. Pritzker, Kansas' Laura Kelly, and North Carolina's Roy Cooper pushed for the passage of the bill back in November 2021.[34][35]

Separately, Ohio governor Mike DeWine, whose state became the home of Intel's newest semiconductor fabrication plant in the Columbus suburb of New Albany, as well as Texas governor Greg Abbott and Texas senator John Cornyn, whose state was the home of a major investment from Samsung, each pushed for the bill to be passed and applauded its advancement through Congress.[36][37][38] It has received widespread support from chip firms, though they were concerned about the provision banning them from further investments in China.[39][40]

Intel CEO Pat Gelsinger said during an earnings call on September 30, 2022, that CHIPS Act subsidies were leading the company to explore building empty fab buildings (known as a "shell-first strategy") and aggressively acquire smaller competitors before installing any equipment, to avoid contributing to a predicted semiconductor glut.[41][42]

Opposition[edit]

The bill was criticized by Republican House leader Kevin McCarthy and senator Bernie Sanders as a "blank check", which the latter equated to a bribe to semiconductor companies.[25][43][44] China lobbied against the bill and criticized it as being "reminiscent of a 'Cold War mentality'".[45]

Concerns of protectionism[edit]

In a piece for the Brookings Institution on December 20, 2022, Sarah Kreps and Paul Timmers expressed concerns regarding the protectionist provisions of the CHIPS and Science Act and the risk of a subsidy race with the EU, which proposed its own European Chips Act in 2022.[46]

Concerns of inaction on labor and stock buybacks[edit]

Robert Kuttner, economic nationalist commentator and editor of The American Prospect, expressed concerns that the bill did not provide enough resources to allow local residents near fabs to organize or form a trade union (thereby making unions rely too heavily on community benefits agreements compared to federal policy), that the Commerce Department would be too friendly to states with right-to-work laws (where the first new fabs would be built), that the bill did not restrictively define a "domestic company" regarding financing, and that fab owners would simply use CHIPS Act money to buy back stocks.[47] In response to these concerns, on February 28, 2023, United States Secretary of Commerce Gina Raimondo published the first application for CHIPS Act grants, which encourages fab operators to use Project Labor Agreements for facilitating union negotiations during construction, outline their plans to curtail stock buybacks, share excess profits with the federal government, and open or point out nearby child care facilities.[48][42][49] The application led to over 200 statements of interest from private companies within the first month and a half, looking to invest across the entire semiconductor supply chain in 35 states;[50][51] by June 2023, the number had reached over 300.[52] The Prospect later covered the lack of progress in PLA talks between key investor TSMC and local unions in Phoenix, and included both author Lee Harris's claim that the Raimondo guidance was insufficient in helping the talks, and liberal commentator Ezra Klein's criticism of the Raimondo guidance as excessive.[53] Harris later reported that as a consequence TSMC and its non-union subcontractors had routinely engaged in alleged wage theft, underreported safety violations, and cut out various installation procedures that would have prevented costly repairs, delaying its projects.[49]

Project announcements[edit]

Many companies and ecosystem suppliers have announced investment plans since May 2020, when TSMC announced that it would build a fab in Arizona.[54][21][55][56]

These include (before the act passed on August 9, 2022):

  • In July 2021, GlobalFoundries announced plans to build a new $1 billion fab in Upstate New York.[57]
  • In November 2021, Samsung announced plans to build a $17 billion semiconductor factory to begin operations in the second half of 2024. It is the largest foreign direct investment ever in the state of Texas.[58]
  • In January 2022, Intel announced an initial $20 billion investment that will generate 3,000 jobs, the largest investment in Ohio's history, with plans to grow to $100 billion investment in eight fabrication plants.[59]
  • In May 2022, Purdue University launched the nation's first comprehensive semiconductor degrees program in anticipation of the CHIPS Act spurring the creation of jobs for 50,000 trained semiconductor engineers in the United States.[60][61]
  • In May 2022, Texas Instruments broke ground on new 300-mm semiconductor wafer fabrication plants in Sherman, Texas, and projected its investments will reach $30 billion and create as many as 3,000 jobs.[62]
  • In July 2022, SkyWater announced plans to build an advanced $1.8 billion semiconductor manufacturing facility with the government of Indiana and Purdue University to pursue CHIPS funding.[63][64]

After the act passed:

  • In September 2022, Wolfspeed announced it will build the world's largest silicon carbide semiconductor plant in Chatham County, North Carolina. By 2030, the company expects to occupy more than one million square feet of manufacturing space across 445 acres, at a cost of $1.3 billion. The first phase of development is supported by about $1 billion in incentives from state, county, and local governments, and the company intends to apply for CHIPS act money.[65]
  • In October 2022, Micron Technology announced it will invest $20 billion in a new chip factory in Clay, New York, to take advantages of the subsidies in the act and signaled it could expand its investments to $100 billion over 20 years.[1][66][67] The state of New York granted the company $5.5 billion in tax credits as an incentive to move there, if it meets employment promises.[66]
  • In December 2022, TSMC announced the opening of the company's second chip plant in Arizona, raising its investments in the state from $12 billion to $40 billion.[68] At that time, company officials said that construction costs in the U.S. were four to five times those in Taiwan (due to alleged higher costs of labor, red tape, and training) and that they were having difficulty finding qualified personnel (so some US hires were sent for training in Taiwan for 12–18 months), so it will cost at least 50% more to make a TSMC chip in the United States than in Taiwan.[69][70][49]
  • In February 2023, Texas Instruments announced an $11 billion investment in a new 300-mm wafer fab in Lehi, Utah.[71]
  • In February 2023, Integra Technologies announced a $1.8 billion proposal for expanding their Outsourced Semiconductor Assembly and Test (OSAT) operation in Wichita, Kansas.[72]
  • In February 2023, EMP Shield announced a $1.9 billion proposal for a new campus in Burlington, Kansas.[73]
  • In April 2023, Bosch announced it was acquiring TSI Semiconductors and investing $1.5 billion in upgrades geared toward making silicon carbide chips at the TSI plant in Roseville, California.[74]
  • In June 2023, the French company Mersen, a subsidiary of Le Carbone Lorraine, announced it will spend $81 million on an expansion project in Bay City and Greenville, Michigan due to Michigan's state implementation of the CHIPS Act.[75]

On October 23, 2023, the Biden administration announced that it directed the Economic Development Administration to focus on 31 areas (across 32 states and Puerto Rico) that it designated "Tech Hubs", for the purposes of spreading development evenly around the country, and incubating advanced technology and research. The Tech Hubs' organizers will compete for a total of $500 million in implementation grants, the first such appropriation out of a budgeted $10 billion over the next five years. The Biden administration also gave out "Strategy Development Grants" to 29 consortia of businesses, labor unions and governments in areas that lost out, encouraging further organizational improvements before vying again to become a Tech Hub.[76][77][78]

Macroeconomic impact[edit]

Estimates of the results of the CHIPS Act vary. The trade group Semiconductor Industry Association, which analyzed announced investments from May 2020 to December 2022, claimed the CHIPS Act had led to more than 50 projects worth more than $200 billion that would create 44,000 jobs.[56] By the count of independent policy researcher Jack Conness, the CHIPS Act led to 28 projects worth $157 billion and a predicted 25,400 jobs as of December 20, 2023; when considered together with Inflation Reduction Act investments, the total comes out to 171 projects worth $255 billion creating 105,600 jobs.[55][needs update]

Arizona is in line for the two largest individual investments (TSMC's $40 billion investment, predicted to create 4,500 jobs; and a $30 billion investment from Intel creating 3,000 projected jobs), the most total jobs created (9,765) and the most dollars overall ($72.2 billion). New York received the second-most overall dollars ($40.3 billion) and jobs created (3,600) and the third largest investments ($20 billion each from Micron and IBM). Counties that voted for Biden in 2020 received more dollars from the Act ($124,096,000,000) than counties that voted for Donald Trump ($33,799,000,000).[55][needs update][79][80][51][81]

In December 2023, the Financial Times found the IRA and CaSA together catalyzed over $224 billion in investments and over 100,000 new jobs by the preceding July.[82]

According to the New Democrat-linked think tank Center for American Progress, the CHIPS and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act have together led to more than 35,000 public and private investments.[83] The Biden administration itself claimed that as of December 22, 2023, the IIJA, CaSA, and IRA together catalyzed over $640 billion in private investment (including $234 billion in electronics and semiconductors, $157 billion in electric vehicles and batteries, $133 billion in clean power and $75 billion in the clean energy industry) and over $425.3 billion in public infrastructure spending (including $37.3 billion in energy aside from tax credits in the IRA).[84][needs update]

California[edit]

Manufacturing[edit]

In California, where the semiconductor industry was founded in Silicon Valley, experts say that it is very unlikely that any new manufacturing facilities will be built, due to tight regulations, high costs of land and electricity, and unreliable water supplies.[5] These factors have contributed to the state's 33% decline in manufacturing jobs since 1990.[5]

Research[edit]

In May 2023, Applied Materials announced it would build a new collaborative advanced research and development center (distinct from traditional fabs) named the "EPIC Center", short for "Equipment and Process Innovation and Commercialization Center", by 2026, next to its existing facility in Sunnyvale, California. The first known CHIPS Act-linked investment in Silicon Valley, the EPIC Center is worth $4 billion and is projected to create 2,000 jobs.[85][86][52]



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The chips are down: The United States makes 12 percent of the world’s semiconductors, compared with 37 percent in the 1990s, according to US government statistics.1 Many US firms are dependent on chips made abroad, and the fragility of those supply chains has been laid bare over the past 18 months. Moreover, McKinsey research estimates that worldwide demand will keep growing, with semiconductors poised to become a $1 trillion industry by the end of the decade.

By the numbers: The CHIPS Act directs $280 billion in spending over the next ten years. The majority—$200 billion—is for scientific R&D and commercialization. Some $52.7 billion is for semiconductor manufacturing, R&D, and workforce development, with another $24 billion worth of tax credits for chip production. There is $3 billion slated for programs aimed at leading-edge technology and wireless supply chains.
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