US Commerce Dept. unveils strategy for distributing CHIPS Act funds

An announcement made this week by the US Department of Commerce detailed the agency’s plans for distribution of $50 billion appropriated under the CHIPS and Science Act, which was signed into law last month by President Joe Biden.

The Act is aimed primarily at revitalizing the domestic semiconductor manufacturing industry in the US, which has seen its market share slip drastically in recent years due to high operational costs compared to its East Asian competition.

About $28 billion of the CHIPS and Science Act funds earmarked for the Commerce Department will go toward underwriting expansions of existing semiconductor manufacturing facilities or the construction of new ones. Specifically, the funds will be made available as loan guarantees and subsidies or grants and cooperative agreements, and the department has said that it hopes to focus more on loan underwriting in order to maximize how far the CHIPS Act dollars will go.

About $10 billion will go to domestic manufacturers that produce legacy chips and specialist products that are used in national defense applications, as well as in what the department called “critical commercial sectors,” like automotive, medical devices and information and communications technology.

Finally, $11 billion will be allocated to three sub-agencies—the National Science and Technology Council, the National Advanced Packaging Manufacturing Program, and the National Institute of Standards and Technology—for coordinated distribution of R&D funding for projects designed to expand workforce development, provide prototyping facilities and create a host of other improvements to the US semiconductor industry.

The CHIPS Act’s major beneficiaries are still thought to be large incumbent domestic chipmakers, most notably Intel, who either already have facilities situated in the US or are planning to build them out. Other players in the semiconductor industry—particularly those focused on design and development, not manufacturing—had expressed concerns about the bill’s focus, and say that there’s not enough in it to truly help the US gain an edge in the global marketplace.

The Act’s passage comes at a weak moment for the semiconductor industry, as supply chain failures—especially those caused by Russia’s ongoing invasion of Ukraine— continue to undercut the market and cause widespread disruption in supply, at the same time as lowered demand for endpoints like PCs and smartphones continues to drop.