CHIPS Act Allocates $52 Billion in Subsidies to Revitalize Semiconductor Manufacturing | Coie Perkins

There has been a global shortage of semiconductors throughout the COVID-19 pandemic which has severely disrupted supply chains in many sectors, underscoring, more than ever, that semiconductors are an essential of contemporary life. The Semiconductor and Science Production Incentives Creation Act (the CHIPS Act), which President Biden signed into law on August 9, 2022, is a $280 billion funding program that specifically allocates 52 $.7 billion in additional emergency funding to expand national semiconductor manufacturing capabilities. Lawmakers intend the CHIPS Act to allow manufacturers to create US-based foundries capable of making the next generation of chips, which in turn would help reestablish the US as a major force in the world. semiconductor industry which he pioneered. .

Due to the shortage of semiconductors during the pandemic, consumers have found once-commonplace products and commodities either prohibitively expensive or completely unavailable despite high demand. Likewise, companies that otherwise relied on readily available semiconductors suddenly found themselves faced with extreme delays and suppliers willing to disrupt long-standing relationships by reopening contract negotiations. To make matters worse, the shortage hit at a time when many companies that weren’t traditionally in the semiconductor business shifted from buying off-the-shelf components to fringe competition by developing their own. fleas.

Largely motivated by the shortage of semiconductors, lawmakers have sought to expand semiconductor manufacturing capacity in the United States. Although the semiconductor industry was initially established in the United States, semiconductor manufacturers have mostly moved their foundries outside the country in recent decades. Lawmakers intend the CHIPS Act to incentivize semiconductor makers to build new manufacturing facilities and upgrade existing ones, which would create new manufacturing jobs and a stronger national supply chain. solid for semiconductors.

Funding Overview

The majority of CHIPS Act funding is dedicated to the CHIPS for America Fund, a $50 billion fund that will subsidize investment in facilities and equipment for semiconductor manufacturing, research and development (R&D) and workforce development programs. Specifically, the CHIPS for America fund includes $39 billion to encourage investment in semiconductor manufacturing and $11 billion to fund general semiconductor research efforts, including the new National Semiconductor Technology Center. (NSTC) and the National Advanced Packaging Manufacturing Program (NAPMP).

The $39 billion in investment incentives are tied to the U.S. Department of Commerce’s (Commerce) semiconductor program, which was established by the National Defense Authorization Act (NDAA) for the fiscal year 2021. To be eligible for funding, an entity must have an “ability to finance, construct, expand or substantially modernize a facility related to manufacturing, assembly, testing, advanced packaging or research and the development of semiconductors.[1] Commerce generally has wide discretion in how it distributes funds, but can only approve applications from eligible entities and for programs that are demonstrated to be in the best interests of the United States. . Recipients may only use the funds for:

  • Finance the construction, expansion or modernization of semiconductor facilities or equipment.
  • Supporting workforce development for a semiconductor factory.
  • Support site development of a semiconductor facility.
  • Pay reasonable operating costs for a semiconductor facility.

The CHIPS Act also commits $2 billion to the CHIPS for Defense Fund, which would establish a national network for on-shore university prototyping and lab-to-manufacturing transition of semiconductor technologies. The remaining funding will go to international technology safety efforts and National Science Foundation (NSF) grants to promote workforce development in semiconductors.

Carry

With new smelter manufacturing costing at least $10 billion, the CHIPS Act is undoubtedly a significant step in the right direction. The hope is that the CHIPS Act incentives will allow manufacturers to create US-based foundries capable of manufacturing the next generation of chips. Further, commitment to research is of fundamental importance not only to U.S. national security interests, but also to fostering an environment in which U.S.-based technology companies can regain the edge by technological development and access to supply.

Perkins Coie has followed semiconductor market developments closely over the past decades and has continued to develop a deep understanding of the complexities of transactions within the semiconductor supply chain, including helping customers to develop unique commercial agreements to guarantee the necessary intellectual capacity. the intellectual property rights, manufacturing capacity and failure solutions needed to succeed. Whether it’s IP licensing design knowledge, unencrypted register transfer (RTL) level modification rights, mass production, wafer cutting and assembly, packaging, testing or collaborating to develop the next generation of integrated circuits to power the virtual world, the advocates at Perkins Coie, we’re ready to help our customers win at the margins and change the way we interact with technology.

Endnote

[1] National Defense Authorization Act for Fiscal Year 2021 § 9902(b)
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