What the $52 Billion CHIPS Act Holds for Manufacturing in the US
This month, President Joe Biden signed the CHIPS and Science Act to bring it into law. The $280 billion package contains a fund of $52 billion to help boost domestic semiconductor manufacturing in response to the ongoing global semiconductor shortage.
Why has the CHIPS Act been brought into law?
It was feared that without government intervention, semiconductor chip manufacturing would continue to be offshored to new foundries in China and that the shortage would continue.
If the manufacturing continued solely in places like China, there would be little room for the U.S. to profit from the industry, which seems unfair, seeing as the U.S. pioneered it decades ago.
Indeed, Intel actually approached the U.S. Department of Commerce to propose taking over a Chinese factory, in the wake of growing demand for semiconductors for tech products like phones and laptops, according to The New York Times.
But now that the CHIPS Act has been implemented, Intel has suspended its plan.
What does the act include?
The $52 billion fund outlined in the CHIPS Act refers to subsidies that will encourage manufacturers to build out semiconductor fabrication plants on U.S. soil. Eligible companies like Intel are now looking to build plants in states like Arizona and Ohio.
The fund, which is actually $52.7 billion, will be made available to qualifying private entities, non-profit entities, and public-private consortia.
Thus, the CHIPS Act will provide substantial financial incentives and opportunities to manufacturers that are a part of the semiconductor supply chain.
Eligibility Requirements
Applicants will have to meet certain conditions to qualify for the federal grants. They will also need to understand the foreign investment and sourcing limitations that are in place.
Any company that wishes to access funds from the CHIPS Act should carefully look through the eligibility requirements and prohibitions before they apply.
Some of the key eligibility requirements and considerations for grant approval include the following:
- Applicants must demonstrate a documented interest in constructing, modernizing, or expanding a facility that is involved in the manufacturing of semiconductors.
- Applicants must receive an offer for a local or state incentive for the project.
- Applicants must commit to paying for training and education benefits and also participate in programs that help to expand employment opportunities to people who are economically disadvantaged.
- Applicants must secure commitments from educational and training entities in order to provide the workforce with job placement programming and employee training.
- Applicants must identify the type of semiconductor equipment, technology, and materials that they intend to use at their facilities.
- Applicants must identify the customers that they intend to serve.
- Applicants must assess and develop plans in order to meet the needs of the workforce.
- Applicants must develop a plan for economic sustainability for their projects.
- Applicants must plan to identify and mitigate security risks within the supply chain.
- Applicants must implement policies that will combat the counterfeiting, cloning, and relabeling of semiconductors.
Various Types of Manufacturing Equipment Will Be in High Demand as More Manufacturers Turn to Producing Semiconductors
As more manufacturers in the U.S. begin to manufacture semiconductors, with help from the funds made available through the CHIPS Act, there is sure to soon be a high demand for all kinds of manufacturing equipment.
Though, thankfully, there will not be a shortage, like with semiconductors. Many manufacturers are already starting to purchase second-hand equipment, like the used CNC mills and used press machines available at Revelation Machinery.
Final Thoughts
If you run a manufacturing business in the U.S., you should consider expanding to produce much-needed semiconductors.
Thankfully, the $52 billion available via the CHIPS Act means you will not have to completely fund the project yourself.