CHIPS for America Act clears U.S. Congress

On July 29, 2022, the CHIPS for America Act was adopted by the U.S. Congress – a monumental piece of legislative news for the U.S. semiconductor industry. It is expected to be signed into law by President Joe Biden before Congress heads into recess in August. The bill provides a 25% tax credit for U.S. facilities that produce semiconductors or chipmaking equipment and $52 billion in funding for new semiconductor programs. The funding includes $39 billion for grants available to semiconductor manufacturers as well as equipment and materials suppliers and $11 billion for federal semiconductor research programs.

In a LinkedIn article the week prior – Eight reasons why we need the CHIPS for America Act NOW!, our Founder, President & CEO Stephen Rothrock explained how the U.S. semiconductor industry is in dire need of these government funds to ensure we continue to fairly compete on the global stage with Asia, China in particular. But now that the biggest hurdle of them all has been overcome, what happens now? We know one thing for certain – more wafer fabs are coming to the U.S., but what are the implications?

  • To the winner goes the spoils – Companies that can execute a site selection process quickly for either a new greenfield or existing wafer fab will be best positioned to take advantage of the benefits of this government funding. Innovative U.S. companies such as Wolfspeed have already demonstrated those best practices. As the most recent fab built on U.S. soil, their new 200mm SiC fab is the perfect example of how beneficial a precise wafer fab/cleanroom selection process can be.
  • The funds needs to be spent wisely – The U.S. needs to balance short-term investments that shore up capacity with spending aimed at mastering cutting-edge manufacturing, as well as longer-horizon R&D of next-generation technologies.
  • More fabs will change hands in coming months – Brownfield fab demand is at an all-time high, especially 200mm fabs and tools, driven by fear of allocation and the desire for internal manufacturing control. ATREG expects the operational brownfield fab shortage to continue through to at least mid-2025​.
  • Endemic fab ecosystem issues need to be addressed – For these funds to be fully optimized, the U.S. government need to find ways to curb ramping inflation impacting the cost of materials, solve supply chain issues, support regional skilled job creation, and reform permits, certifications, and entitlements that are slowing down U.S. fab construction.
  • This initial package is not sufficient – The CHIPS Act has a total cost of $79.344 billion over 10 years, according to the official scorekeeper for Congress, the non-partisan Congressional Budget Office (CBO). While this package will help us keep pace with incentive programs around the world for now, it is not enough over the long term. The U.S. administration will need to do more and soon.

While powerful semiconductor players (Samsung, TSMC) have a significant lead over their U.S. counterparts, China and other countries are subsidizing their domestic chipmaking by the boat load. It will be hard enough catching up, even harder leaping ahead.