The CHIPS Act (CHIPS and Science Act) is a legislation passed by the US government in 2022, aimed at enhancing America’s competitiveness in the semiconductor manufacturing and research fields. CHIPS stands for “Creating Helpful Incentives to Produce Semiconductors,” and it seeks to promote semiconductor production and scientific research through a series of incentive measures.
The CHIPS Act initially allocated most of the $33 billion fund to major corporations. Four leading semiconductor manufacturers became the primary beneficiaries of these funds, occupying important positions in the early stages of the program. The CHIPS Act has also provided significant assistance to specific tech companies, which have become the new favorites in the “inflation era.” However, with $6 billion of funding still available, the focus has now shifted to small and medium-sized enterprises in the semiconductor supply chain.
The remaining funds will be distributed to dozens of small and medium-sized businesses with the aim of attracting private investment, strengthening supply chain resilience, and enhancing economic security by supporting domestic materials and packaging facilities in the United States.
Michael Schmidt, Director of the CHIPS Program Office at the Department of Commerce, emphasized this broader investment strategy in an interview with CNBC. He said, “We are really focused on investing in the entire semiconductor ecosystem.”
The funding strategy includes investments in upstream suppliers (companies that provide materials and equipment) and downstream participants (such as companies involved in advanced packaging and final production). Schmidt also mentioned that mature technology companies (i.e., traditional chip manufacturers) may receive a portion of the remaining funds.
Schmidt stated, “Once we start to rebuild that ecosystem in this country, once we start to rebuild the scale that we expect to see in this country, I think it will create sustained investment and continue to attract companies to invest in the future.”
With nearly 85% of the CHIPS Act funds already allocated, the Department of Commerce plans to distribute the remaining $6 billion by the end of the year. Although over 600 companies have expressed interest, only nine companies have received awards so far.
Intel, TSMC, Samsung, and Micron: totaling nearly $28 billion
GlobalFoundries: $1.5 billion
BAE Systems, Microchip, Polar Semiconductor, Absolics: totaling $392 million
Secure Enclave Program: $3.5 billion for military-grade semiconductors
The current awards primarily support front-end manufacturing, specifically wafer production. Paul Triolo, Head of Tech Policy at Albright Stonebridge Group, attributes this focus to the political nature of the incentives and the need to demonstrate progress in advanced manufacturing capabilities.
Secretary of Commerce Gina Raimondo has pledged to establish a complete US chip supply chain by 2030, which will require balancing incentives for upstream and downstream companies. Schmidt reiterated that significant investments in all aspects of the supply chain are already part of the plan.
Announced awards have prompted private companies to commit over $300 billion in advanced production investments. Schmidt expects small suppliers to benefit from this, and the Department of Commerce has allocated $500 million for companies with total capital investment of less than $300 million.
Schmidt stated, “We will really see those benefits throughout the industry. And I still think we’re going to make very significant investments in the upstream supply chain and really build a comprehensive set of capabilities that advance our economic and national security interests.”
One potential awardee is IQE, a UK-based company that produces compound semiconductor wafers. CEO Americo Lemos emphasizes the importance of funding small and medium-sized companies to ensure the security and resilience of the US chip supply chain.
Lemos said, “We need to ensure continued attention to the entire supply chain in an environment where geopolitics is challenging. Of course, the industry focuses on AI, GenAI, and their benefits and applications, but manufacturing high-performance chips alone is not enough. Without compound semiconductors, there is no AI – it’s as simple as that.”
Schmidt pointed out that the remaining grants will be smaller compared to the billions of dollars already allocated, but even modest incentives can have a significant impact on small companies.
Jimmy Goodrich, Senior Advisor for Technical Analysis at RAND Corporation, said, “For those upstream projects, a small amount of money can do a lot. There is still a lot of room for development.”
CHIPS and Science Act
CHIPS Act
CNBC