US Senate passes CHIPS Act 2022, bans recipients from expanding advanced chip capacity in specific countries

Judy Lin, DIGITIMES Asia, Taipei 0

Credit: AFP

The Senate on July 27 passed CHIPS and Science Act of 2022, bipartisan legislation in a vote of 64-33. A total of US$52.7 billion will be spent as a 5-year incentive for developing domestic semiconductor manufacturing capabilities and other programs.

In the legislation, section 103 stipulates that recipients of Federal incentive funds are prohibited from expanding or building new manufacturing capacity for "certain advanced semiconductors in specific countries that present a national security threat to the United States." Though China is not specifically mentioned therewithin, media such as CNBC and Reuters have interpreted that the CHIPS Act is to boost US production in competition with China.

Within the US$52 billion funding, US$39 billion is allocated over 5 years to subsidize the domestic chip manufacturing capacities; US$2 billion is provided to focus on legacy chip production to advance economic and national security interests; US$6 billion may be used for the cost of direct loans and loan guarantees.

In FY22, US$19 billion of the budget has been allocated, including the US$2 billion for legacy chip production funding. US$5 billion each year from FY23 through FY26.

There are also US$11 billion appropriated over 5 years for R&D and workforce development programs, and US$2 billion appropriated for on-shore, university-based prototyping, lab-to-fab transition of semiconductor technologies, etc.

A 25% investment tax credit is also created for investments in semiconductor manufacturing and includes incentives for the manufacturing of semiconductors, as well as for the manufacturing of the specialized tooling equipment required in the semiconductor manufacturing process. The credit is provided for a property that is placed in service after December 31, 2022, and for which construction begins before January 1, 2027.

Companies such as Intel, TSMC, GlobalFoundries, Micron Technology, Texas Instrument, Samsung, etc. have all announced new plants or capacity expansions in the United States, and are likely to tap the funding. Since the legislation is focused on boosting domestic chip manufacturing capabilities, IC design or EDA companies are not eligible for the US$39 billion funding.

The bill will be sent to the House for review and votes before going to the desk of the US President for signing into effect.