What you need to know: Federal Semiconductor Funding Bill (CHIPS Act)

Last week, Congress passed the CHIPS and Science Act which is a $52 billion incentive package intended to boost domestic production of chipmaking by helping private companies build and expand manufacturing plants. The measure also offers tax credits to chip manufacturers and $1.5 billion to boost the rollout of 5G wireless technology in more rural areas, including large portions of Colorado.

Chips, also known as semiconductors, are critical to the U.S. economy, technology leadership, national security, and everyday life for consumers. Semiconductors are needed to run everything from cell phones to vehicles and the current shortage of chips highlights the vital role of semiconductors throughout the entire economy — including aerospace, automobiles, communications, defense systems, manufacturing, information technology, medical technology, and more.

The bipartisan bill has been more than a year in the making and is needed as the United States, which once manufactured 40% of semiconductors in the world, now makes just 12% and is on pace to have just a 9% world production share in 2030. Supporters of the bill stress the importance of advancing national security, strengthening our supply chain, and boosting U.S. manufacturers’ competitiveness.

“This legislation is a bold, important step toward ramping up the domestic manufacturing of essential inputs used by virtually every part of our industry. Every vote for the CHIPS-Plus Act was a vote for a more competitive manufacturing industry in America. This bipartisan legislation shows that Congress is taking the problems of supply chain disruptions and inflation seriously. Every manufacturer will benefit,” says National Association of Manufacturers President and CEO Jay Timmons. Timmons was the keynote speaker at the Colorado Chamber’s Colorado Business Day event earlier this year, which focused on the state’s vibrant manufacturing community.

While the bulk of the $52 billion in spending in the bill will be sent to large plants located across the U.S., smaller sums of money will go to mid-sized plants involved with chip design or manufacturing and some Colorado plants could be in line for grants according to the Colorado Office of Economic Development and International Trade.

Local firms could also take advantage of the 25% tax credit for semiconductor-related manufacturing, including companies creating medical devices, 3-D printed materials and some other equipment. The bill also includes critical funding for semiconductor research that could also be doled out to local firms.

The CHIPS and Science Act is expected to be signed into law by President Biden sometime next week. The U.S. faces several gaps and vulnerabilities in the semiconductor supply chain, but this bill is a step in the right direction to furthering our economy, revitalizing the manufacturing industry, and advancing the U.S.’ global technology leadership.