In June 2020, a bipartisan group of U.S. lawmakers introduced the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS for America Act) and American Foundries Act to invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology. Provisions from these bills were included in the Senate and House versions of the National Defense Authorization Act (NDAA), which were passed by their respective Chambers in July and now await action by a conference committee to merge them into final legislation.

Incentivize New Domestic Semiconductor Manufacturing Facilities

“Semiconductors were invented in America and U.S. companies still lead the world in chip technology today, but as a result of substantial government investments from global competitors, the U.S today accounts for only 12 percent of global semiconductor manufacturing capacity,” said Keith Jackson, President, CEO, and Director of ON  Semiconductor and 2020 Semiconductor Industry Association (SIA) Chair. “The CHIPS for America Act would help our country rise to this challenge, invest in semiconductor manufacturing and research, and remain the world leader in chip technology, which is strategically important to our economy and national security. We applaud the bipartisan group of leaders in Congress for introducing this bill and urge Congress to pass bipartisan legislation that strengthens U.S. semiconductor manufacturing and research.”

The U.S. currently maintains a stable chip manufacturing footprint, but the trend lines are concerning. There are commercial fabs in 18 states, and semiconductors rank as our nation’s fifth-largest export. However, significant semiconductor manufacturing incentives have been put in place by other countries, and U.S. semiconductor manufacturing growth lags behind these countries due largely to a lack of federal incentives.

The CHIPS for America Act includes a range of federal investments to advance U.S. semiconductor manufacturing, including $10 billion for a new federal grant program that would incentivize new domestic semiconductor manufacturing facilities. The bill also includes a refundable investment tax credit
for the purchase of new semiconductor manufacturing equipment and other facility investments.

Advancing R&D to Drive Chip Technology Breakthroughs

Research is critical to advancing semiconductor innovation in the U.S. American semiconductor design and manufacturing companies invest approximately one-fifth of revenue in R&D, almost $40 billion in 2019, representing the second-highest rate of research investment of any industry. Federal government investment in semiconductor research, however, is only a small fraction of total semiconductor R&D in the U.S. and has been relatively flat as a share of GDP for many years. Meanwhile, China and others are increasing their government research investments.

The CHIPS for America Act would make significant federal investments at the Department of Defense, the National Science Foundation, and the Department of Energy to promote semiconductor and drive chip technology breakthroughs. The bill would establish a National Semiconductor Technology Center to conduct research and prototyping of advanced chips, as well as create a center on advanced semiconductor packaging.

American Foundries Act

Another bipartisan bill, the American Foundries Act, which includes a $15 billion federal grant program that would incentivize new domestic semiconductor manufacturing and R&D facilities, has also been introduced in the Senate in late June 2020. Provisions from the two bills were included as amendments in the Senate and House versions of the National Defense Authorization Act (NDAA). It now awaits action by a conference committee to merge them into final legislation which will be a process that could take through the end of the year.

“As global competitors invest big to attract advanced semiconductor manufacturing to their shores, the U.S. must get in the game and make our country a more competitive place to produce this strategically important technology,” said John Neuffer, President and CEO of the Semiconductor Industry Association.

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Semiconductor Industry Association