CHIPS and Science Act Q&A

What is the CHIPS and Science Act?

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act, or CHIPS and Science Act) was signed into law on August 9, 2022. This bipartisan act includes substantial investments to ensure that the US maintains its place in world leadership through domestic technology enhancement and commercialization.

Primary objectives:

  • Boost US competitiveness.
  • Increase innovation in R&D and commercialization of leading-edge technologies such as clean energy, nanotechnology, and artificial intelligence.
  • Bolster national security.
  • Create regional high-tech hubs.
  • Foster a more inclusive STEM workforce (Science, Technology, Engineering, and Math).

What are the financials of the program?

Over the next ten years, the CHIPS Act includes $280 billion in spending, broken down as follows:

  • $200 billion for scientific research and development (R&D) and commercialization.
  • $52.7 billion for the semiconductor field, including R&D, manufacturing, and workforce development.
  • $24 billion in tax credits for chip production facilities and equipment.
  • $3 billion for programs focusing on wireless supply chains and other leading-edge technology areas.

Why focus on the semiconductor industry now?

Semiconductor shortages have severely impacted global supply chain issues. In the 1990s, the US produced 37% of the world’s semiconductors. Today, that number is down to 12%. The last 18 months have demonstrated the risk associated with dependence on these global supply chains. As the demand for semiconductors continues to escalate, US firms need a way to ensure self-reliance against another worldwide supply chain crisis.

The US Department of Commerce will oversee a $50 billion investment to expand domestic semiconductor manufacturing, including $11 billion for advanced R&D activities and $39 billion focused on accelerating domestic chip production.

How does this help national security?

Significant investments are being made to support government efforts:

  • $2 billion to the US Department of Defense for funding microelectronics research, fabrication, and workforce training.
  • $500 million to the US Department of State for coordination of semiconductor supply chain security with foreign-government partners.
  • $1.5 billion for funding the USA Telecommunications Act of 2020 will enhance the competitiveness of 5G networks.

How did tax credits get into the mix?

Building new semiconductor fabrication plants will require massive investment, even beyond the proposed level of government funding. Recognizing the need to encourage private investment, the CHIPS Act also allows taxpaying entities to receive a 25% tax credit on investments in semiconductor manufacturing – both facilities and processing equipment. The Congressional Budget Office (CBO) has estimated that these tax credits will cost $24 billion over the next five years.

What’s happening with STEM?

Over the next five years, the law authorizes $174 billion to several federal science-related agencies. The money has not yet been appropriated through the proper government oversight, yet this is expected to happen. The money is earmarked for investments in STEM, workforce development, and R&D, including:

  • $81 billion to the National Science Foundation (NSF).
  • $67 billion to the US Department of Energy.
  • $11 billion to US Economic Development Administration.
  • $10 billion to the National Institute of Standards and Technology (NIST).

In summary

The CHIPS and Science Act will:

  • Strengthen American manufacturing, supply chains, and national security.
  • Increase investment in R&D, science, and technology.
  • Bring the US workforce into the future to keep the US a leader in technology and the industries of tomorrow.
  • Make smart investments allowing the US to compete and win in the future.

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4 thoughts on “CHIPS and Science Act Q&A”

  1. Great article providing high-level summary of something that will impact us all. The important question how can I contribute to the overall success of this act?

  2. AT — this is interesting, really educational. BTW, I over heard you telling someone a few some of the basics of how a microchip is manufactured. I meant to ask you more. Can you post something on that in the future? or if you have, just point to it. thanks, johnb

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