CHIPSfor AMERICA - A STRATEGY FOR THE CHIPS FOR AMERICA FUND
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CHIPSfor AMERICA A STRATEGY FOR THE CHIPS FOR AMERICA FUND
CHIPS.gov for AMERICA
A STRATEGY FOR
THE CHIPS FOR
AMERICA FUND
The U.S. Department of Commerce
September 6, 2022
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statutory Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Industry and Stakeholder Input. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PART I: GUIDING PRINCIPLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PART II. BACKGROUND ON THE U.S. SEMICONDUCTOR INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART III. IMPLEMENTING THE CHIPS PROGRAM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Key Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART IV: CONSIDERATIONS FOR APPLICANTS FOR CHIPS INCENTIVES. . . . . . . . . . . . . . . . . . . . . . 14
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ENDNOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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INTRODUCTION Statutory Background
This document describes the U.S. Department of Sections 9902 and 9906 of the William M. (Mac)
Commerce’s implementation strategy for the Creating Thornberry National Defense Authorization Act for
Helpful Incentives to Produce Semiconductors Fiscal Year 2021 (referenced herein as “the 2021
(CHIPS) for America Fund, a $50 billion investment NDAA”2) authorized semiconductor manufacturing
to catalyze long-term growth in the domestic semi and R&D activities, collectively called the “CHIPS
conductor industry in support of our national and program” in this document. The CHIPS Act of 2022
economic security. enhanced the CHIPS program with new authorities
and appropriated $50 billion to the Department to
The Department of Commerce (the “Department”)
implement it.3
has identified four strategic goals for the CHIPS for
America Fund: Section 9902 of the 2021 NDAA authorizes the
Department to provide funding to eligible applicants
• Invest in U.S. production of strategically impor-
to incentivize investment in facilities and equipment in
tant semiconductor chips, particularly those using
the United States for the fabrication, assembly, test-
leading-edge technologies.1
ing, advanced packaging, production, or research and
• Assure a sufficient, sustainable, and secure supply development of semiconductors, materials used to
of older and current generation chips for national manufacture semiconductors, or semiconductor man-
security purposes and for critical manufacturing ufacturing equipment.4 The Department may provide
industries. funding in various forms, including grants, cooperative
• Strengthen U.S. semiconductor research and devel- agreements, loans, and loan guarantees.5 The CHIPS
opment (R&D) leadership to catalyze and capture Act of 2022 appropriates $39 billion for these pur-
the next set of critical technologies, applications, poses.6 With these funds, the Department will estab-
and industries. lish an incentives program to support the expansion
• Grow a diverse semiconductor workforce and build of manufacturing capacity for mature nodes and to
strong communities that participate in the prosper- attract large-scale investments in advanced technolo-
ity of the semiconductor industry. gies such as leading-edge logic and memory.
These objectives go beyond supporting the construc- Section 9906 of the 2021 NDAA authorizes the
tion of a few semiconductor manufacturing facilities, Department to establish a National Semiconductor
or “fabs.” Over the long term, the CHIPS for America Technology Center (NSTC) to conduct research and
Fund must enable and sustain a vibrant domestic prototyping of advanced semiconductor technol-
industry that supports quality jobs, a diverse work- ogy and to establish a National Advanced Packaging
force, and a robust supplier base of large and small Manufacturing Program (the “Advanced Packaging”
firms, while revitalizing high-volume semiconductor program or “NAPMP”) led by the director of the
manufacturing, renewing U.S. strengths in design, Department’s National Institute of Standards and
materials, and process innovation, and benefiting the Technology (NIST). Section 9906 also authorizes NIST
broader economy. Achieving these goals will require to establish up to three Manufacturing USA institutes
new thinking and partnerships from policymakers and to advance research and commercialization of semi-
the private sector to unlock the productive capacity conductor manufacturing technologies, and to carry
of industry, workers, and communities. This docu- out an R&D program to advance measurement sci-
ment describes the principles that will guide the ence, standards, material characterization, instrumen-
Department’s program design, the industry context in tation, testing, and manufacturing capabilities.7 The
which the CHIPS for America Fund will operate, the CHIPS Act of 2022 appropriates $11 billion for these
distinct initiatives within the Fund, and some consid- purposes.8
erations for future applicants for CHIPS funding that Both Sections 9902 and 9906 authorize and direct
require long-term preparation. investments in the semiconductor workforce. UnderCHIPSfor AMERICA
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Section 9902, incentives recipients must make work- The Department, pursuant to Executive Order 14017,
force development commitments and must secure “America’s Supply Chains,”15 engaged broadly with
“commitments from regional educational and training stakeholders to inform a 100-day review of the sup-
entities and institutions of higher education to pro- ply chains for semiconductor manufacturing and
vide workforce training, including programming for advanced packaging. That review identified vulner-
training and job placement of economically disad- abilities and fragilities and made recommendations for
vantaged individuals.”9 The Advanced Packaging and building more resilient supply chains.16 This strategy
Manufacturing USA institute programs established by document reflects the lessons and recommendations
Section 9906 will have elements of workforce devel- in that review and builds on work the Biden-Harris
opment. Finally, the NSTC is tasked with incentivizing Administration and the Department have undertaken
and expanding workforce development activities.10 The over the last 18 months to mitigate acute disruptions
Department will coordinate workforce development in semiconductor supply chains and build long-term
activities across these programs and with other agen- resilience in the industry, with a focus on rebuilding
cies funded in this topic area, notably the National domestic manufacturing capacity.
Science Foundation (NSF), and with interagency
The Department also issued a Request for Information
efforts through the CHIPS Implementation Steering
(RFI)17 that closed at the end of March 2022 and
Council established by President Biden in Executive
sought information to inform the planning and design
Order 14080, “Implementation of the CHIPS Act of
of CHIPS programs. The Department received over
2022,”11 and the Subcommittee for Microelectronics
250 responses from a wide range of companies
Leadership established by Section 9906(a) of the 2021
representing multiple sectors of the semiconductor
NDAA.12
supply chain, including design software developers,
Section 107 of the CHIPS Act of 2022 creates a new integrated device manufacturers, materials suppli-
advanced manufacturing investment tax credit (ITC) ers, equipment vendors, fabless companies, automo-
to be administered by the Internal Revenue Service tive and industrials consumer companies, along with
of the Department of the Treasury. The ITC is equal academics, labor unions, investors, and civil society
to 25 percent of the value of qualified investments stakeholders. The Department has hosted workshops
in buildings and other eligible depreciable tangible and listening sessions with different parts of the
property for advanced manufacturing facilities that semiconductor value chain, and has received exten-
have a primary purpose of manufacturing semi sive input from industry participants, state economic
conductors or semiconductor manufacturing equip- development officials, and other interested parties.
ment.13 The Department expects that the ITC will serve
Industry and community input has highlighted specific
as an important tool to close the cost gap between
risks to mitigate, and specific strengths and opportuni-
investment in the United States and other countries.
ties to exploit. Key themes—including ideas to attract
CHIPS program funding will be a significant, additional
private capital, commercialize new R&D and technol-
source of funding to enhance strategic and critical
ogy, improve supply chain and demand transparency,
capabilities in the United States. The ITC is available
attract and train talented workers, and work with
for projects that start construction between January 1,
states and localities to expand economic clusters—
2023, and December 31, 2026.14
are captured in this document. A complete report on
feedback from the RFI is available here.
Industry and Stakeholder Input
Engagement with stakeholders throughout the imple- PART I: GUIDING PRINCIPLES
mentation of the CHIPS program is a Department of
The Department of Commerce will balance urgent
Commerce imperative. This strategy paper is informed
needs in the semiconductor industry with long-term
by extensive engagement with semiconductor indus-
strategic goals. The Department encourages partici-
try leaders and experts in academia, nonprofits, local,
pants to view CHIPS as a long-term program and a
state and federal government, public-private entities,
sustained collaboration between the public and pri-
national security entities, labor leaders, and interna-
vate sectors.
tional partners and allies.CHIPSfor AMERICA
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As the Department embarks on program design, ecosystem collaborations that reduce risk, build on
it will follow the implementation principles set U.S. strengths, and facilitate such investments.
forth by President Biden in Executive Order 14080, • Generate benefits for a broad range of stake
“Implementation of the CHIPS Act of 2022”: holders and communities. A successful CHIPS
• Protect taxpayer dollars. The CHIPS program will program will create benefits for startups, workers,
include rigorous review of applications along with small businesses, minority-owned, veteran-owned,
robust compliance and accountability requirements women-owned and rural businesses, universities
to ensure taxpayer funds are protected and spent and colleges, and state and local economies, in
wisely. addition to supporting semiconductor compa-
nies. The CHIPS program will encourage linkages
• Meet economic and national security needs.
to underserved regions and populations to draw in
The CHIPS program must address economic and
new participants to the semiconductor ecosystem.
national security risks by building domestic capac-
ity that reduces U.S. reliance on vulnerable or overly PART II. BACKGROUND ON THE
concentrated foreign production for both leading U.S. SEMICONDUCTOR INDUSTRY
edge and mature microelectronics, and increasing
U.S. economic productivity and competitiveness. The Semiconductor Industry and Wider Ecosystem
U.S. long-term economic and national security inter- of Software, Design, Tools, Materials, Equipment,
ests require a sustainable, competitive domestic Customers, Workers, and Investors Are a Unique
industry. National Asset, Critical to Economic and National
Security.
• Ensure long-term leadership in the sector. The
CHIPS program will establish a dynamic, collabora- Chips are an integral part of a consumer’s everyday
tive network for semiconductor research and inno- life. They are found in household items, such as cof-
vation to enable long-term U.S. leadership in the fee makers, garage door openers, and refrigerators,
industries of the future. The program will support as well as in more complex products such as mobile
a diversity of technologies and applications along phones, pacemakers, and automobiles. They are fun-
many stages of product and process development. damental to the operation of virtually every military
• Strengthen and expand regional manufacturing system, including communications and navigations
and innovation clusters. Long-term competitive- systems, and complex weapons systems such as those
ness requires large economies of scale and invest- found in sophisticated fighter jets. Semiconductors are
ments across the supply chain. Regional clusters key to the technologies of the future, including artifi-
containing manufacturing facilities, suppliers, basic cial intelligence and 5G.
and translational research, and workforce programs, The semiconductor industry creates high-wage jobs,
along with supporting infrastructure, will be the including in construction, design, and manufacturing,
foundation for a competitive industry. The CHIPS and involves significant amounts of R&D spending.
program will facilitate the expansion, creation, and Economic activity in this ecosystem encompasses
coordination of semiconductor manufacturing and basic science, technology development, and capital-
innovation clusters that benefit many companies. intensive manufacturing over an extraordinary variety
• Catalyze private sector investment. A successful of new products and niche applications. Moore’s Law—
CHIPS program will respond to market signals, fill the prediction that the performance of chips doubles
market gaps, and reduce investment risk to attract every 2 years or so—has shaped the industry for
significant private capital. The role of government more than 50 years, with a new generation of semi
in the CHIPS program is to shift financial incen- conductor devices emerging at a predictable pace.
tives to maximize large-scale, private investment This pace of innovation and the resulting variety of
in production, break-through technologies, and chips and devices has revolutionized entire industries
workers. The CHIPS program will encourage new and unleashed new types of information processing
and communications capabilities.CHIPSfor AMERICA
7
The Industry Structure for the Manufacturing of • A mismatch and loss of worker skills in the con-
Semiconductors Has Changed Dramatically Over the struction and operation of manufacturing facilities
Past 30 Years. because U.S. construction of large-scale fabs and
packaging facilities has been limited in the last
The United States no longer produces the world’s most
decade.
advanced semiconductors and has lost the ability to
produce key supply chain inputs such as lithography
At the Same Time, the United States Remains Strong,
tools, substrates, and some specialty chemicals.18 The
but Vulnerable, in Semiconductor Design, Research,
United States fabricates only 10 percent of global chip
and Development.
capacity today, and provides only 3 percent of global
packaging, assembly, and test capacity.19 Over two- The United States is the world’s leader in chip design
thirds of the most advanced semiconductors are made and design automation tools, capturing roughly half
in Taiwan, and since 2020, nearly 75 percent of new the value of chips manufactured from these designs;
capacity for certain mature nodes has been added it is critical that we capitalize on these strengths.
in the People’s Republic of China (PRC).20 The risks However, the United States is at risk of losing this
to national and economic security created by these leadership position due to the erosion of the manufac-
changes are aggravated by the PRC’s commitment of turing base. As the manufacturing process becomes
extensive resources to invest in semiconductor tech- more complex, new chip designs require tight coordi-
nologies critical to U.S. military superiority and eco- nation with fabrication processes to ensure manufac-
nomic competitiveness.21 turability. The challenge of moving designs and R&D to
commercial production, sometimes called the “lab to
The semiconductor industry is experiencing height-
fab” problem, threatens to shut out smaller firms and
ened demand across a range of end-use industries.
startups, deterring innovation.24 The challenge is due
Total revenues could exceed $1 trillion over the next
to the following factors:
decade.22 As new capacity is built to meet long-term
demand, the CHIPS program goal is to have much of • At the design phase, chips need to be manufac-
that new capacity constructed in the United States by tured in small quantities to debug and validate the
addressing some of the main challenges to increasing design, yet foundries and advanced packaging
domestic semiconductor production including: facilities are not set up to enable small runs. This
prototyping process requires improved access to
• The significant cost gap between building and oper-
shared infrastructure such as multiproject wafer
ating a manufacturing facility in the United States,
runs and design libraries.
and building and operating the same facility else-
• The costs of prototyping and proving designs has
where, which results from the differences in govern-
gone up worldwide. Venture capital and other
ment subsidies, construction timelines, and ongoing
investors are reluctant to invest in projects at the
operating costs.23
early stage given the high cost, the long time to
• The decline in U.S. capital investments in manufac-
validation, and the resulting risk.
turing capacity and technology upgrades, which
• The industry lacks agreement on roadmaps to
makes it harder to master the next learning curve of
guide the concurrent development of tools, materi-
process innovations and build the next generation
als, and manufacturing processes.
of chips.
• The industry faces difficulty in attracting and retain-
• The extremely high cost of building a leading-edge
ing domestic and international research scientists in
fab, and the resulting “fabless” business model that
the highly competitive broader market for technol-
separates the activity of designing a new chip from
ogy talent.
the process to manufacture it, which has created
dependence on a few, very large foundries. • For innovations beyond design, such as new
devices and materials, high development costs and
• Lack of visibility into demand forecasts has long
long payoff times pose additional risks.
driven a boom and bust cycle in the global semi-
conductor manufacturing industry, creating head-
winds for domestic investment.CHIPSfor AMERICA
8
Future Trends chemicals, requiring industry to respond to those
customers, investors, and members of the public
The United States cannot look back and simply try to
who are focused on ambitious net zero goals for
recreate what has been lost. Instead, the success of
energy, water, and waste.27 Recently, major semi-
the CHIPS program relies on recognizing and facilitat-
conductor customers have shown leadership by
ing the continued evolution of the industry in a way
adopting renewable energy pledges, often not just
that builds U.S. strength. The CHIPS program will
for their own operations but also for their suppliers.
consider these trends in its review and prioritization of
The United States has a deeper and more cost-
projects to fund.
effective renewable energy market than many semi-
• Technology improvement must come from new conductor competitor countries, which can enable
sources. After decades of steady gains following fabs to contract for long-term, stable, renewable
the prediction of Moore’s Law, the industry now power.
exhibits diminishing returns as reflected in rising • Resilient supply chains are a focus of business and
cost per transistor, slowing performance gains, and government. The semiconductor supply chain has
challenges with energy efficiency.25 New hardware become fragile and susceptible to disruptions.
breakthroughs are needed from advanced packag- Creating a more resilient domestic and global sup-
ing, new architectures, novel tools, and alternate ply chain is important to protect U.S. economic
materials. growth and control costs for businesses and con-
• Mature nodes are critical to key sectors. As chip sumers alike. A resilient supply chain is one that
technology advances have slowed, many commer- recovers quickly from an unexpected event. In man-
cial customers (including in critical-sector indus- ufacturing, firms often use visibility, buffering, and
tries) have delayed their migration to newer chips. agility to improve their resiliency.28 For high-tech
These important applications rely on chips that industries, like semiconductors, long-term competi-
are often built in overseas fabs and are vulnerable tiveness requires a strong ecosystem that supports
to the risks of concentrated offshore fabrication. both research and production.29 This ecosystem,
Moreover, the shortage of even one simple, low-cost which includes production, innovation, skilled work-
part from a mature node can halt the manufactur- ers, and diverse small- and medium-sized suppliers,
ing line for a complex product. often requires co-location of resources in particular
• Risks are created by increased industry and geo- geographic regions to achieve economies of scale
graphic consolidation. The cost of semiconductor and spillover benefits that support R&D, production
manufacturing has grown exponentially, with new innovation, and capital formation.30
leading-edge fabs now costing over $10 billion These trends will inform the implementation of the
each, with the most advanced technology nodes Department’s semiconductor incentives and R&D
requiring well above this amount. The cost of creat- programs.
ing advanced chip designs is growing as well, some-
times exceeding $100 million to prove out a design PART III. IMPLEMENTING THE CHIPS PROGRAM
for a leading-edge chip.26 Rising development and
production costs are continuing to drive business Organization
consolidation and raise barriers to entry for these
The Department intends to implement the CHIPS
activities, contributing to geographic and corpo-
program with the creation of two new offices housed
rate consolidation. Geographic consolidation brings
at NIST, the CHIPS Program Office (CPO) and the
with it significant risk, including vulnerabilities to
CHIPS R&D office. The CPO will be a new operat-
shutdowns caused by pandemics, severe weather
ing unit established to implement the Section 9902
events, cyber breaches, and social and geopolitical
semiconductor incentives program and provide policy
disruptions.
and stakeholder engagement support across CHIPS
• Environmental sustainability will be increasingly programs. The CPO, working closely with the Office of
important. The chip fabrication process has grown the Secretary and the Under Secretary of Commerce
in its demand for electricity, water, and hazardous for Standards and Technology, will work to ensureCHIPSfor AMERICA
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coordination of all CHIPS-related activities across applicants to consider forming collaborations with
the Department. The CPO will actively participate in suppliers, customers, investors, state, local, or tribal
White House-led coordination efforts, including the governments, or other relevant entities as appropriate.
CHIPS Implementation Steering Council, to ensure a
tightly connected implementation of CHIPS through- Key Initiatives
out the government, including the Departments The Department’s CHIPS program will consist of three
of Defense, State, Energy, and Homeland Security, distinct initiatives. Each initiative addresses a set of
the Office of the Director of National Intelligence, strategic challenges, has a different time horizon and
the NSF, and the Office of the United States Trade speed of implementation, and involves a partially over-
Representative. The CPO will draw on the technical lapping set of stakeholders and incentives.
expertise of these agencies.
1. Large-scale investments in leading-edge logic
The CHIPS R&D office will incubate the NSTC, and and memory manufacturing clusters
manage the Industrial Advisory Committee, Advanced
Packaging, Manufacturing USA, and R&D activities, in The CHIPS program aims to establish domestic
collaboration with existing NIST laboratories and the production of leading-edge logic and memory
NIST Office of Advanced Manufacturing. chips that require the most sophisticated pro-
cesses available today. The Department will seek
NIST was selected as the bureau to house these new proposals for the construction or expansion of
units because of its deep technical expertise, industry manufacturing facilities to fabricate, package,
focus, experience with public-private partnerships, and assemble, and test these critical components, par-
strong administrative functions. ticularly focusing on projects that involve multiple
In concert with other agencies and bureaus of the high-cost, production lines and associated sup-
Department of Commerce, as appropriate, the CPO plier ecosystems.
and the CHIPS R&D office will engage with compara- The Department expects this initiative to account
ble entities in allied and partner economies to advance for approximately three quarters of the CHIPS
shared goals on supply chain resiliency and technol- incentives funding under Section 9902, or approx-
ogy protection. imately $28 billion.35 The CHIPS funding may be
available for grants or cooperative agreements,
Eligibility
or to subsidize loans or loan guarantees—the
An eligible applicant for funding under the Section Department expects to use loan and/or loan
9902 incentives program must be a “covered entity,” guarantee authority to increase the program’s
which can be a private entity, a nonprofit entity, a economic impact. The Department is still assess-
consortium of private entities, or a consortium of non- ing the impact of the ITC on capital expenditure,
profit, public, and private entities with a demonstrated which will generate significant additional project
ability to substantially finance, construct, expand, or investment from participants and will reduce the
modernize a facility relating to fabrication, assembly, required share of federal CHIPS incentive funding
testing, advanced packaging, production, or research allocated for leading edge projects. Overall, CHIPS
and development of semiconductors, materials used funding is only a small part of the total expected
to manufacture semiconductors, or semiconductor investment in the semiconductor industry. When
manufacturing equipment.31 combined with the ITC, private investment, loans,
and state and local funding, total investment in
CHIPS funds must be used for facilities built in the
the industry will be many multiples of the amounts
United States32 and cannot support facilities being
available for CHIPS incentive funding.
constructed or operated abroad.33 Domestic compa-
nies and foreign companies (except those that are a As part of this initiative, the CPO will work with
“foreign entity of concern”34) that seek to use CHIPS the Department of Defense, the Office of the
funds for qualifying investments in the United States Director of National Intelligence, and other rel-
can be eligible. The Department encourages potential evant agencies to define and meet requirementsCHIPSfor AMERICA
10
for “secure and assured” microelectronics (secure Funding will be provided only after a rigorous
design, production, and material handling pro- merit review and may include a mix of instru-
cesses mitigate against the risks of tampering with ments, for example grants, loans, and loan guar-
or counterfeiting microchips). antees. The value of the total financial assistance
may vary considerably, depending on the specifics
The CPO’s solicitation for applications will include
of each project.
extensive information on the required components
of the application and how proposals will be eval- For this initiative, the Department expects dozens
uated. To enable potential applicants to prepare of awards with the total value expected to be at
in advance, this document includes some details least one quarter of the available CHIPS incentives
on those program elements that require long-term funding under Section 9902, or approximately
planning in Part IV of this paper (“Considerations $10 billion. Those amounts may be available for
for Applicants”). grants or cooperative agreements, or to subsidize
loans or loan guarantees. As is the case for leading
The Department’s goal is to begin soliciting appli-
edge facilities, the ITC will generate significant
cations within six months of enactment of the
additional project investment for participants and
CHIPS Act of 2022. The CPO’s process will include
the Department is assessing the ITC impact on
a preliminary application stage that will enable
allocations between programs. The Department
applicants to get feedback from the CPO before
will also use loan and/or loan guarantee author-
submitting a complete application.
ity. The Department expects the total investment
2. Expanding manufacturing capacity for mature in the industry from all sources to be substantially
and current-generation chips, new and specialty greater than the amounts available for CHIPS
technologies, and for suppliers to the industry. financial assistance.
The CHIPS program will increase domestic pro- The CPO’s solicitation for applications will include
duction of semiconductors across a range of extensive information on the required components
nodes including chips used in defense and in of the application and how the applications will
critical commercial sectors such as automobiles, be evaluated. To enable companies to prepare in
information and communications technology, advance, this document includes detail on those
and medical devices. This initiative is broad and program elements that require long-term plan-
flexible, encouraging industry participants to ning in Part IV of this paper (“Considerations for
craft creative proposals. Examples of the types of Applicants”).
proposals covered in this initiative include but are
The Department’s goal is to begin soliciting appli-
not limited to:
cations within six months of enactment of the
◦ Construction or expansion of facilities for the CHIPS Act of 2022. The CPO’s process will include
fabrication, packaging, assembly, and testing of a preliminary application stage that will enable
legacy and current-generation semiconductors, applicants to get feedback from the CPO before
including all types of logic, memory, discrete, submitting a complete application.
analog, and optoelectronic chips.
3. Initiatives to strengthen and advance U.S. leader-
◦ Facilities to produce new or specialty technolo- ship in R&D
gies such as advanced analog chips, radiation-
hardened chips, compound semiconductors, or The R&D initiatives include the NSTC, the NAPMP,
emerging technologies. the Manufacturing USA Institute(s), and the NIST
metrology investments that together received $11
◦ Facilities that manufacture equipment and
billion in funding under the CHIPS Act of 2022.
materials for semiconductor manufacturing,
These R&D initiatives are expected to operate in
potentially co-located in regional clusters.
coordination with each other, with the semicon-
◦ Equipment upgrades that provide near-term ductor incentives program under Section 9902 of
efficiency improvements in fabs. the 2021 NDAA, and with microelectronics R&DCHIPSfor AMERICA
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programs supported by other U.S. federal agen- specific companies, technologies, or steps in the
cies. Such coordination may include the sharing of supply chain.
infrastructure, participants, and projects. • Technical competence on par with the best engi-
This constellation of programs is intended to cre- neering and scientific talent in the industry.
ate a dynamic, new network of innovation for the • Ability to attract leaders with in-depth understand-
semiconductor ecosystem in the United States. ing of the semiconductor ecosystem from materials
This vision will take sustained investment over to applications.
many years and require collaboration with other • Ability to attract leaders who understand the com-
stakeholders engaged in semiconductor research. plexities of managing government and commercial
The long-term payoff will be reestablishing this interests in an R&D enterprise, including the respon-
sector as the engine of innovation for the U.S. sible stewardship of public funds and protection of
domestic economy. intellectual property.
• Responsiveness to government and industry advi-
National Semiconductor Technology Center (NSTC)
sors tasked with coordinating national and interna-
The NSTC will be a public-private entity that tional R&D strategy for microelectronics.
includes participation from industry, universities, the • Ability to work across U.S. government agencies,
Department of Defense, the Department of Energy, including with microelectronics R&D programs
and the NSF to conduct research, provide prototyping supported by the Department of Defense, the
capabilities, establish an investment fund, and expand Department of Energy, and NSF.
workforce development programs.
• A complementary and collaborative role relative to
The funding provided by the CHIPS Act of 2022 comparable organizations in allied countries.
for the NSTC should be viewed as seed capital. The
The Department expects the NSTC to focus on
Department envisions an organization that grows over
advancing semiconductor design, scaling new manu-
time to be a significant force for advancing innovation
facturing processes, developing new tools and mate-
in semiconductors and microelectronics, with substan-
rials, and improving the lab-to-fab product flow.
tial financial and programmatic support from com-
The NSTC may support a range of programs includ-
panies, universities, investors, and other government
ing grand challenges identified by industry and the
agencies, including those at the state and local levels.
research community, the operation and provision of
Industry programs will be built to ensure that the
prototyping facilities, investment and technical sup-
NSTC is responding to long-term market needs while
port to new and emerging companies in partnership
meeting the national security and commercial objec-
with the venture community, and potentially creating
tives of the program, including building a plan for
a shared physical and virtual infrastructure of enabling
long-term financial sustainability. The NSTC will attract
technologies such as design automation software. In
collaborators and research partners from around the
addition, the NSTC is expected to support the devel-
world, including from partners in allied countries, to
opment of standards and technical roadmaps to guide
participate in compelling opportunities to advance
simultaneous development of materials, tools, soft-
future technologies. In brief, the Department envisions
ware, and end-use applications.
the NSTC as the center for excellence for the country
in the semiconductor industry. Another critical role for the NSTC will be workforce
development. This role will require a collaborative
As the Department develops a governance structure
and well-funded nationwide effort to build the pipe-
for the NSTC, it will consider the following:
line of workers needed to expand the semiconductor
• Access rules that enable broad participation, industry. There is a severe shortage of workers who
including from startups, small firms, fabless semi are trained and ready to fill new roles in specialized
conductor companies, in-house semiconductor construction, fab operations, and semiconductor
designers, allied international entities, and uni- design. At the same time, workers around the country
versities, rather than being tuned to the needs of are seeking quality jobs, even in a tight labor market.CHIPSfor AMERICA
12
The need to reimagine and scale education, train- material systems. NIST will work with network partici-
ing, and recruitment is one of the industry’s greatest pants to establish a pilot packaging facility to enable
challenges. Employment in the U.S. semiconductor the testing and integration of new approaches and
manufacturing industry has remained around 185,000 processes. This capability will be closely aligned with
workers since 2009, with new hiring mainly to replace the NSTC and accessible to the broader community.
attrition.36 The industry will need to significantly
increase the intake of new workers annually to keep Manufacturing USA Institute
pace with new capacity. It is possible that up to $8 Manufacturing USA, a national network of 16 institutes
billion of investment may be needed over the next five engaging manufacturing, government, and academic
years to substantially address the industry’s workforce organizations provides members with access to
needs. The NSTC will play a key role in coordinating state-of-the-art facilities and equipment to promote
and scaling up the ongoing workforce development research, propel new products to market, and train the
and recruitment efforts such as those currently led by workforce. NIST will launch a process to establish up
industry associations, individual companies, state and to three new Manufacturing USA Institutes, bringing
local governments, and other federal agencies, includ- together a consortium of industry and university part-
ing the Department of Labor, Department of Defense, ners focused on addressing semiconductor manufac-
NSF, and the Department’s Economic Development turing challenges.
Administration, to maximize their overall effectiveness.
The new Manufacturing USA institutes are expected
The CHIPS R&D office will incubate the NSTC and to emphasize virtualization and automation, among
continue to work closely with the NSTC to ensure other topics. Significant productivity and cost savings
accountability and stewardship in the use of public can be derived from more widespread adoption of
funds. In consultation with stakeholders, the CHIPS virtualization and simulation of wafer production, and
R&D office will work to ensure that the NSTC has improved automation of manufacturing processes and
a clear vision, an effective governance structure, materials handling and logistics. These techniques can
and a 10-year financial plan that ensures long-term bring down the cost of new designs and create more
sustainability. “tape-out” opportunities for more startups.38 Such
efforts can reduce barriers to innovation and improve
National Advanced Packaging Manufacturing Program
connections and communications between product
(NAPMP)
and process design and execution, which is particu-
After semiconductors are fabricated, they are “pack- larly vital for advanced packaging. The institutes also
aged” in a container that is adhered to a printed cir- will provide opportunities for workforce training on
cuit board, ultimately ending up in the products that technologies critical across the industry.
we use. Packaging is labor intensive and principally
located in Asia. Many older devices and applications, Metrology Research
including defense equipment, rely on conventional The ability to measure semiconductors throughout the
packaging. It is economically challenging to bring con- fabrication process is an essential part of enabling the
ventional packaging back to the United States. But the high-yield and high-quality fabrication that is required
United States can compete in advanced packaging, for economic viability. Advances in the industry are
which is anticipated to generate 50 percent of pack- driving ever more exacting requirements for materi-
aging revenue by 2024.37 als purity, defect tolerances, materials properties,
To expand U.S. capabilities in advanced packaging, and in-line processes. Measurement capabilities must
NIST will establish the National Advanced Packaging improve quickly for the CHIPS investments to yield full
Manufacturing Program. The Department envisions value. NIST will expand ongoing metrology research
forming a network of entities to create a robust programs to enable breakthroughs in measurement,
domestic advanced packaging capacity including standards, and process capabilities for the fabrication
substrate production, heterogeneous integration, and of next-generation semiconductors. Specific expan-
the ability to work with and incorporate diverse new sion efforts will include:CHIPSfor AMERICA
13
• Physical metrology for next-generation microelec- certain commitments, and the CPO expects that proj-
tronics, including 3D devices for logic and memory ects will be funded in increments over time as mile-
and 3D heterogeneous integration/advanced stones are achieved.
packaging.
The CPO also will implement congressionally-
• Computational metrology for computationally mandated guardrails to ensure recipients of CHIPS
intensive and data-driven aspects of semiconductor funds cannot compromise national security by sending
metrology. the latest technology abroad. In addition, any com-
• Virtualization and automation for computationally pany that receives funding will be prohibited for 10
intensive and data-driven aspects of semiconductor years from engaging in significant transactions involv-
manufacturing. ing the material expansion of semiconductor manufac-
• Measurement services such as standard reference turing capacity in PRC or other countries of concern,
materials, calibration services, and standard refer- subject to limited exceptions authorized in law.
ence data.
The CPO will ensure that taxpayer investments maxi-
• Measurement and documentary standards in areas mize public benefits. Eligible applicants must provide
of industry priority to include cybersecurity mea- evidence of significant worker and community invest-
sures, metrics, and solutions. ments along with commitments from educational
institutions for worker training, including programs to
Accountability, Reporting, and Oversight for Section
expand opportunity for economically disadvantaged
9902
individuals. The Department expects to prioritize pro-
The Department will maintain the highest ethical stan- posals that include significant worker and community
dards in the operation of the CHIPS program, working investments. Davis-Bacon requirements will apply to
to uphold the public’s trust by ensuring compliance CHIPS-funded construction projects, which ensures
with ethics laws and regulations and making all deci- workers earn local prevailing wages. The CPO also
sions in the best interest of the United States. The will prioritize applicants with well-developed propos-
Department will seek to maximize the public benefits als designed to increase participation of and outreach
of federal investments, protect national security inter- to economically disadvantaged individuals, minor-
ests, and ensure funds produce broadly shared ben- ity-owned businesses, veteran-owned businesses,
efits. This effort is essential across all CHIPS initiatives, women-owned businesses, and rural businesses in the
but especially in the incentives program under Section geographic area of each project.
9902. Accountability will begin at the application
stage, with a rigorous review of proposals to ensure Finally, the private sector recipients cannot use any
projects are economically viable and compatible with public funds on stock buybacks or dividend payments
the overall CHIPS strategy. Proposals that satisfy this to shareholders. Further, the CPO will give preference
robust review will be subject to a variety of perfor- in awards to applicants who commit to make future
mance, reporting, audit, and oversight conditions investments that grow the domestic semiconductor
established and overseen by the CPO. These condi- industry (such as through research and development,
tions will enable the CPO to meet statutory require- workforce training, or manufacturing investments) and
ments, protect taxpayer funds, and ensure compliance not engage in stock buybacks.39
with agreed proposal goals. The CPO will strictly monitor the use of funds to
Federal funding will be contingent on the necessity, ensure recipients are delivering on their commitments.
appropriateness, and long-term economic viability This includes enforcing many important guardrails
of a project. The application process will verify the in the CHIPS Act, which cover appropriate uses of
technical and financial merit of the project, rationale government funds, project delays, IP transactions that
for public funding, and organizational structure and raise national security concerns, and investments in
operational capabilities of the applicant. The review foreign countries of concern. The CPO may develop
also will include an assessment of economic impact. other guardrails, as needed and consistent with the
The Department may recover funds if recipients fail law, to maximize the public purposes of federal invest-
to start or complete projects on time or fail to meet ments and prevent recipients from seeking to evadeCHIPSfor AMERICA
14
statutory requirements. The CPO will not hesitate to Increase Scale and Attract Private Capital.
claw back funds or pursue other remedies if recipients
The CHIPS program seeks to improve U.S. manufac-
misuse taxpayer dollars.
turing capacity by increasing the number and scale
of U.S. fabs and associated assembly, packaging,
International Coordination
and testing facilities. When it comes to semiconduc-
The CPO, in partnership with the relevant Department tor fabrication, economies of scale matter. Large-
bureaus and other agencies, will engage with allies scale fabs are more competitive, more attractive for
that are providing funding for semiconductor produc- suppliers to co-locate, and more likely to see con-
tion or developing critical R&D, workforce, and supply tinued investments to extend their productive life.
chain capability. Yet, U.S. fabs average only about one-half the scale
of an Asian fab.40 The CPO will encourage large-
This engagement will advance the overall resilience of
scale investments that attract associated suppliers
the American and allied semiconductor supply chains.
and workforce investments, thus catalyzing future
International engagement will focus on improving
upgrades and expansions, ensuring long-term eco-
transparency of market conditions, including sharing
nomic viability.
information on public investments and supply chain
disruptions. Coordination will aim to mitigate risk of Although $39 billion in federal funds and the ITC are
oversupply and ensure that U.S investments in manu- crucial and significant investments, they will not be
facturing and R&D are strategic. Coordination will enough on their own to create the capacity needed
include efforts to reduce geographic concentration in for our national and economic security needs. Funding
upstream materials and downstream industries. The awards will be calibrated to provide the minimum fed-
CPO, relevant Department bureaus and other agen- eral investment required to attract significant private
cies, will work with allies and partners to promote investment to create economically viable projects at
investment guardrails and national security commit- sufficient scale. The Department encourages propos-
ments. Finally, coordination will seek to limit escalation als that leverage private capital, both investments
of subsidies for the industry, promoting government from the fab companies themselves as well as outside
funding that is necessary and appropriate. sources of capital. In addition to committing their own
significant resources, semiconductor companies are
The CPO and relevant Department bureaus will coordi-
encouraged to explore creative financing structures to
nate with the Department of State as it implements the
tap a variety of sources of capital at different places
CHIPS for America International Technology Security
on the risk-reward spectrum to reduce the overall cost
and Innovation Fund. The CPO and relevant Department
of capital. Infrastructure funds and asset managers
bureaus will coordinate with the U.S. Agency for
may find new investment opportunities in the sector
International Development, the Export-Import Bank, and
due to the following factors:
the U.S. International Development Finance Corporation
in their efforts to support international semiconductor • The industry has seen reduced cyclicality and high
supply chain activities and projects. levels of utilization over the last decade, and
despite some near-term uncertainty of demand,
PART IV: CONSIDERATIONS FOR APPLICANTS is expected to see robust long-term demand
FOR CHIPS INCENTIVES growth for semiconductors across multiple end-use
The CPO will articulate clear eligibility, evaluation, and industries.
selection criteria for proposals for CHIPS incentives • A fab project’s significant industrial infrastructure
under the Section 9902 program. This section identi- needs (such as upgraded power grids, gas lines,
fies some evaluation factors the CPO will consider that and water treatment facilities) and other local
require long-term planning in order to give early guid- infrastructure needs, such as housing and com-
ance to potential applicants as they prepare to submit munity amenities, may present familiar investment
projects for consideration. opportunities.CHIPSfor AMERICA
15
The Department plans to use loans and loan guaran- • Enabling fabless design firms: Although much of
tees to leverage the impact of government grants. the CHIPS program is focused on building fabs, the
The Department can allocate up to $6 billion out of Department also encourages projects that enable
the $39 billion of total incentives to support loans and fabless design firms to succeed. Projects that pro-
loan guarantees to covered entities. This $6 billion has vide better access to design tools and IP, more flex-
a significant multiplier effect: the principal amount of ible access to fab resources, and better portability
financing available through loans and loan guarantees of designs between fabs are encouraged.
could be leveraged to support a $75 billion credit • Collaboration between producers and suppliers:
program. Applicants will be encouraged to consider The Department encourages collaboration, includ-
loans or loan guarantees as part of their federal assis- ing consortium-like proposals, by semiconductor
tance application package. In addition to increasing fabricators and their upstream suppliers (e.g., of
the amount of available capital, government loans substrates or specialty chemicals), equipment pro-
and guarantees may enable more flexible repayment viders, and downstream partners (e.g., of assembly,
terms, extend CHIPS benefits to a wider set of small test, and packaging). Such downstream activities
manufacturers, and attract other lenders to step in will improve the resiliency of the entire supply chain
with private debt financing. but may be financially viable only when combined
with U.S. fabrication investments.
Leverage Collaborations to Build Out Semiconductor
Ecosystems. Secure Additional Financial Incentives and Support
to Build Regional and Local Industry Clusters and
The CPO will encourage collaboration between indus-
Corridors That Strengthen Communities.
try stakeholders, investors, customers, designers, and
suppliers; and international firms to attract investors, The 2021 NDAA requires that applicants demon-
foster innovation, reduce risk, increase transparency, strate they have secured incentives from state or
and ensure that investments are consistent with future local government. Those incentives can take multiple
market demand. forms, and can include workforce-related incentives,
concessions with respect to real property, funding for
Such collaborations could include, but not be limited R&D, and others to be specified in the future.41 The
to: Department expects to prioritize support for projects
• Purchase commitments and other initiatives to that include state and local incentive packages with
improve demand transparency: The Department the potential for large spill-over benefits, are based on
encourages projects where a manufacturer secures performance, and maximize regional and local com-
commitments from one or more customers to petitiveness as well as economic gains, including sup-
purchase a share of the project’s output. Such porting a robust semiconductor ecosystem rather than
commitments to purchase from an onshore project a single company. Examples of encouraged incentives
can help de-risk the project, attract more capital, include:
and induce larger-scale, domestic investments. The • Investments in industrial infrastructure that specifi-
Department encourages purchase commitments cally support the proposed project, but that also
and collaborations across the supply chain to clarify could support broader development of a supplier
future demand, improve transparency and trust, ecosystem such as shared utility, logistics, and pro-
and mitigate the risk of future chip shortages or duction capacity.
oversupply. These benefits are particularly valuable
• Workforce investment to ensure broad talent
for mature logic, analog, and discrete technology
pipelines.
projects that may be exposed to demand fragmen-
tation and lower prices and margins. • Long-term tax credits to ensure that firms continu-
ally invest in upgrading and expanding facilities to
maintain competitiveness.CHIPSfor AMERICA
16
Along with these incentives, the Department expects Expand the Workforce Pipeline to Match Increased
to prioritize funding for proposals that can move Domestic Capacity Workforce Needs.
quickly, reduce project risk, demonstrate ample local
The Department expects to encourage projects that
support and/or regional cooperation, and provide
include effective and creative workforce development
broad-based benefits. State and localities could show
solutions at the scale required to meet demand. A
this commitment in various ways, including:
wide range of roles need to be filled, including process
• Expedited processes for environmental, health, and engineers, material scientists, industrial operations
safety reviews and permits. specialists, engineering technicians, equipment opera-
tors and installers, and specialty construction workers
• Liaisons to assist with site selection, supplier dis-
such as cleanroom architects, high-purity welders, and
covery, and compliance with local laws.
pipefitters. Meeting these goals will require creative
• A systems integrator that works with ecosystem recruitment and training efforts that provide oppor-
companies to address shared issues like navigating tunities for many people. Project proposals should
permits, building infrastructure, finding workers, include investments to scale proven models as well
and coordinating incentive applications. as ideas for pilot programs that are driven by market
• Planning and support for other ancillary needs and are inclusive of populations that have tradi-
investments such as housing and community tionally been underrepresented in the industry.
development.
The Department also encourages programs that
• Where relevant, partnership with other states and
enable employers, training providers, workforce devel-
localities to develop regional ecosystems and cor-
opment organizations, labor unions, and other key
ridors that encompass multiple jurisdictions.
stakeholders to work in partnership to create more
Establish a Secure and Resilient Semiconductor paid training and experiential apprenticeship pro-
Supply Chain. grams, and to hire based on skills, not just degrees.
Proposals should consider recruitment strategies that
In addition to providing direct financial assistance to
include targeted outreach to economically disad-
produce secure and assured current generation and
vantaged individuals and to populations that may
leading-edge chips from mature nodes for national
be underrepresented in the industry such as women,
security uses, the Department also seeks to improve
people of color, workers in rural areas, and veter-
the security of commercial semiconductor supply
ans. To enable this outreach, the CPO will encourage
chains. The Department expects to prioritize projects
proposals that include comprehensive wraparound
that adhere to standards and guidelines on informa-
supports like child care, transportation, language
tion security, data tracking and verification, and that
supports, high-speed internet, mentoring, and career
collaborate on further development and adoption of
counseling. Creating quality jobs will be key to
such standards.
attracting and developing talent. The Department
U.S. national and economic security relies on access to expects to prioritize investments in projects that con-
semiconductors in the face of supply shocks. Recent nect workforce training dollars to quality jobs that
government reports highlight a wide range of supply exceed the local prevailing wage for an industry in
chain risks that can disrupt the operation of CHIPS- the region, including basic benefits (e.g., paid leave,
funded manufacturing facilities.42 The Department health insurance, retirement/savings plan) and/or are
expects to prioritize investments that address these unionized.
supply chain risks including, but not limited to, poor
The potential of well-crafted workforce programs
demand visibility, single sourcing and geographic
funded through the CHIPS program is to offer life-
chokepoints, transport and logistical bottlenecks,
changing opportunities for many individuals. The
weather-related disruptions, counterfeiting and tam-
industry employs 277,000 people in semiconductor
pering, IP theft, and cybersecurity vulnerability.
design, manufacturing, and related fields across 49You can also read
