Commerce Department Releases Strategy for Implementation of the $50 Billion CHIPS Act Fund

The fund will work to grow current semiconductor production while also investing in next-generation technology.

The Commerce Department outlined its strategy Tuesday for the implementation of its $50 billion fund from the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022, signed on Aug. 9, to bolster America’s domestic semiconductor industry.

Semiconductor chips serve as the essential building blocks of much of the world’s most critical technology and can be found in everything from refrigerators to pacemakers to fighter jets. But, according to a 2020 Congressional Research Service report, only 10% of the world’s chip capacity is Made in America, and only 3% of the world’s packaging, assembly, and test capacity is in the United States. Meanwhile, the vast majority of the semiconductor industry is concentrated in Southeast Asia, and the Chinese government is working aggressively to expand its semiconductor technologies. Needless to say, the race is on to establish dominance in this future-shaping industry.

The Commerce Department’s CHIPS fund aims to put the U.S. back at the head of that race by reshoring semiconductor manufacturing. In its strategy paper released Tuesday, the department offers four overarching goals for the fund: sponsoring the growth of strategically important semiconductor chips; securing a stable and sustainable supply chain; strengthening semiconductor research and development; and growing a diverse workforce in the industry.

Approximately $28 billion of the CHIPS fund will be utilized to establish domestic production of cutting-edge chips, nearly $10 billion dedicated to the expansion of manufacturing capacity for mature and current-generation chips, and roughly $11 billion is allotted to strengthen U.S. leadership in semiconductor R&D.

“Rebuilding America’s leadership in the semiconductor industry is a down payment on our future as a global leader,” said Secretary of Commerce Gina Raimondo in a press release. “CHIPS for America, will ensure continued US leadership in the industries that underpin our national security and economic competitiveness. Under President Biden’s leadership, we are once again making things in America, revitalizing our manufacturing industry after decades of disinvestment and making the investments we need to lead the world in technology and innovation.”

Importantly, the billions upon billions of dollars that will be invested in the semiconductor industry are to be paired with the aim of thoughtfully cultivating a more inclusive workforce “hire[d] based on skills, not just degrees.”

The department states in its strategy paper that it will encourage its programs to work with training and apprenticeship programs and give priority to projects “that connect workforce training dollars to quality jobs that exceed the local prevailing wage for an industry in the region, including basic benefits (e.g., paid leave, health insurance, retirement/savings plan) and/or are unionized.” As jobs within the semiconductor industry average nearly $170,000 a year, these career opportunities could be life-changing.

Minority-owned, veteran-owned, and women-owned businesses will be prioritized and proactively included in construction contracts, production, R&D, and other investment opportunities, according to the Commerce Department.

The CHIPS fund is open to both domestic and foreign companies, but applicants must not be a “foreign entity of concern” and the money must be used for domestic facilities.

In addition to other accountability measures, the CPO will “implement congressionally-mandated guardrails to ensure recipients of CHIPS funds cannot compromise national security by sending the latest technology abroad.” Companies that receive money from the fund will be “prohibited for 10 years from engaging in significant transactions involving the material expansion of semiconductor manufacturing capacity in [China] or other countries of concern.”

Specific application guidance for the CHIPS fund will be released by early February 2023.