CHIPS and Science Act of 2022

What Is the CHIPS and Science Act of 2022?

The CHIPS and Science Act of 2022—aka the Creating Helpful Incentives to Produce Semiconductors for America Act—refers to legislation signed into law by President Biden on Aug. 9, 2022, and adopted as Public Law No. 117-167.

Originally pegged at $52 billion, the passed legislation invests nearly $250 billion in a combination of semiconductor and other scientific research and development (R&D). An additional $20 million appropriation goes to provide enhanced security for members of the U.S. Supreme Court and their families.

Key Takeaways

  • The CHIPS and Science Act of 2022 invests nearly $250 billion in semiconductor and scientific research and development (R&D).
  • The act, which became law on Aug. 9, 2022, mainly seeks to implement previously authorized programs under the CHIPS for American Act 2021 and authorize the largest publicly funded R&D program in the country’s history.
  • The legislation seeks to return the United States to dominance in chipmaking and to combat supply chain issues that have arisen from the country’s decline in science and technology.
  • Included in the legislation is a $20 million appropriation to provide security for members of the U.S. Supreme Court and their families.
  • Once fully implemented, the CHIPS and Science Act of 2022 will represent the largest publicly funded five-year investment in research and development in the country’s history.

Understanding the CHIPS and Science Act of 2022

The CHIPS and Science Act of 2022 has two main objectives: implementing previously authorized programs under the CHIPS for America Act of 2021, and authorizing the most extensive publicly funded five-year R&D program in the country’s history.

Implementing the CHIPS for America Act

In January 2021, Congress passed the CHIPS for America Act into law. This legislation authorized the Department of Commerce (DOC), Department of Defense (DoD), and Department of State (DOS) to develop onshore domestic manufacturing of semiconductors. This legislation stemmed from the fact that only 12% of chips are currently manufactured in the U.S., compared with 37% in the 1990s.

The CHIPS and Science Act of 2022 provides appropriations to implement programs authorized by the CHIPS for America Act and more. It includes provisions preventing recipients of federal funds from these programs from building advanced semiconductor production facilities in countries that present a national security concern, such as China.

The act also appropriates funds needed to implement the USA Telecom Act, part of the National Defense Authorization Act for Fiscal 2021. This program will reinforce the global telecommunications supply chain and limit the involvement of telecom companies with close ties to the Communist Party of China.

America’s Research & Development Lag

As much as 85% of productivity growth in the U.S. has stemmed from technological advances. A large part of this has come from partnerships between the federal government and the private sector. Increasing global competition in technology—along with the fact that U.S. federal R&D spending as a percentage of gross domestic product (GDP) is near its lowest point in 60 years—is behind a move to reverse these trends via the second main objective of the CHIPS and Science Act of 2022.

The act authorizes in dollar terms the largest five-year investment in public R&D in American history. In addition to a dramatic increase in research funding, the act will build new technology hubs across the country in a move designed to increase the participation of underrepresented populations and locations. An overarching goal is to stop the theft of U.S. research by foreign entities.

Congressional Budget Office (CBO) estimates for the CHIPS and Science Act were conducted on Division A and Division B of the legislation as it existed on July 20, 2022, and do not apply to the final legislation that became law on Aug. 9, 2022.

Cost Breakdown of the Act

The CHIPS and Science Act of 2022 invests billions over the next five years to help the U.S. regain a leading position in semiconductor chip manufacturing. H.R. 4346, which houses the act, includes an additional $20 million to protect members of the U.S. Supreme Court and their families. The table below lists the major funding categories for the act.

H.R. 4346 Funding
 Section Name Amount
Division A CHIPS Act 2022 $54.2 billion
Investment Tax Credit (ITC) (est.) $24 billion
Division B Research & Innovation $169.9 billion
Total for CHIPS & Science Act of 2022 $248.1 billion
Division C Supreme Court Supplemental Appropriations $20 million
Total appropriations $248.12 billion

CHIPS Act 2022

Department of Commerce (DOC) Manufacturing Incentives: This includes $39 billion to build, expand, and modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging, or R&D, including $2 billion specifically for mature (legacy) semiconductors. Within the incentive program, up to $6 billion may be used for the cost of direct loans and loan guarantees.

Department of Commerce (DOC) Research and Development: Up to $11 billion is allocated for DOC research and development at the DOC National Semiconductor Technology Center (NSTC), the DOC National Advanced Packaging Manufacturing Program, the DOC Manufacturing USA Semiconductor Institute, and the DOC Microelectronics Metrology R&D program.

CHIPS for America Workforce and Education Fund: The act includes $200 million to kick-start development of the domestic semiconductor workforce, which faces near-term labor shortages, by leveraging activities of the National Science Foundation (NSF).

CHIPS for America Defense Fund: $2 billion for the DoD goes to implement the Microelectronics Commons, a national network for onshore, university-based prototyping, lab-to-fab transition of semiconductor technologies—including DoD-unique applications—and semiconductor workforce training.

CHIPS for America International Technology Security and Innovation Fund: $500 million for the DOS—in coordination with the U.S. Agency for International Development, the Export-Import Bank, and the U.S. International Development Finance Corp.—goes to support international information and communications technology security and semiconductor supply chain activities, including supporting the development and adoption of secure and trusted telecommunications technologies, semiconductors, and other emerging technologies.

Public Wireless Supply Chain Innovation Fund: $1.5 billion through the DOC National Telecommunications and Information Administration (NTIA)—in coordination with the National Institute of Standards and Technology (NIST), the Department of Homeland Security, and the Director of National Intelligence, among others—goes to spur movement toward open-architecture, software-based wireless technologies, and fund innovative, “leap-ahead” technologies in the U.S. mobile broadband market.

The act requires recipients of federal financial assistance to agree not to expand semiconductor manufacturing in the People’s Republic of China.

Investment Tax Credit (ITC)—$24 billion

At an estimated cost of $24 billion, the act also provides a 25% investment tax credit to companies that invest in semiconductor manufacturing. Based on a bipartisan bill known as the Facilitating American Built Semiconductors (FABS) Act, this credit covers both manufacturing equipment and constructing semiconductor manufacturing facilities.

Research and Innovation—$169.9 billion

National Science Foundation (NSF): Involves significant investments in science, including the development of an NSF Directorate for Technology, Innovation, and Partnerships to accelerate the development of national and economic security critical technologies. Additional investments will be made in basic research; building a science, technology, engineering, and math (STEM) workforce; building broad-based research opportunities; and expanding rural STEM education.

Department of Commerce (DOC) Technology Hubs: The act directs the DOC to create 20 geographically distributed regional technology hubs that will focus on technology development, job creation, and expanding U.S. innovation capacity. Another project will be designed to support persistently distressed communities with economic development activities.

National Institute of Standards and Technology (NIST) Authorization: This part of the act will advance research and standards development for industries of the future. This will include quantum information science, artificial intelligence, cybersecurity, advanced communications technologies, and semiconductors. Other components seek to support small- and medium-sized manufacturers with cybersecurity, workforce training, and supply chain resiliency. The act also seeks to promote competitiveness in international standards.

National Aeronautics and Space Administration (NASA) Authorization: Provides authorization for the Moon-to-Mars Exploration Campaign, including the return of America to the moon. Other programs seek to maintain the International Space Station through 2030, extend NASA’s enhanced-use lease authority, support NASA’s search for life beyond Earth, advance U.S. aeronautics leadership, and enhance NASA’s technology, infrastructure, and workforce. The act also invests in ensuring planetary defense, including protecting Earth from asteroids and comets.

Research Security to Protect Federal Investments in the U.S. R&D Enterprise: This legislation requires the NSF to maintain a Research Security and Policy Office to identify potential security risks, conduct outreach and education to the research community, establish procedures and policies on research security for the Foundation for Energy Security and Innovation at the Department of Energy (see below, under “Additional Department”), and conduct risk assessments of applications and disclosures. The act further prevents federal research agencies from participating in foreign talent recruitment programs.

Department of Energy (DOE): Reauthorizes fundamental research and development activities performed by scientists at the DOE, the National Laboratories, universities, and private companies to advance our understanding of the atom, the cell, the Earth’s systems, and the universe.

Additional DOE Science and Innovation Provisions: Establishes a Foundation for Energy Security and Innovation at the DOE to foster partnerships among government, industry, startups, and outside funding organizations to increase funding opportunities from the private sector, accelerate commercialization of technologies, and provide workforce training in energy security and innovation fields.

What is the main purpose of the CHIPS and Science Act of 2022?

The main goals of the CHIPS and Science Act of 2022 are to implement programs authorized under the CHIPS for America Act of 2021 and to fund the largest research and development (R&D) program in the nation’s history.

How much will the CHIPS and Science Act cost?

Estimates vary, and analysis of the passed legislation by the Congressional Budget Office has not been completed, but the legislation is expected to cost nearly $250 billion once fully enacted.

Will the CHIPS and Science Act of 2022 impact inflation?

Time will tell, but on July 28, 2022, U.S. House Majority Leader Steny Hoyer, D-Md., issued a statement that read in part, “This bipartisan, bicameral legislation will address inflation, bolster production of critical semiconductor chips here at home, create new jobs, expand economic opportunity, and ensure workers and businesses have the tools they need to Make It In America.”

Hoyer quoted the Mankato [Minn.] Free Press, which printed this opinion on July 20, 2022: “A commonsense plan to encourage homegrown computer chip manufacturing should be a slam dunk for Congress to pass before its August recess…the semiconductor bill will boost the U.S. manufacturing and improve national security as we won’t have to rely on foreign sources for the growing need for semiconductors. It may also tamp down inflation in everything that uses computer chips as the domestic production will likely be cheaper than imports.”

The Bottom Line

The impact of the CHIPS and Science Act of 2022 on domestic computer chip supplies may not be felt immediately due to the lead time required to build and start up domestic manufacturing facilities. The same applies to investments in R&D that require long periods of trial and error before new technology becomes mainstream.

On the whole, however, experts applaud the legislation for boosting the science and technology sectors, providing subsidies to begin manufacturing semiconductors in the U.S., and addressing China’s anti-competitive trade practices. As such, the CHIPS and Science Act of 2022 represents a huge investment by the U.S. in science and technology as well as one of the strongest moves yet to move the U.S. into a position to regain world semiconductor dominance.

Article Sources
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  19. Mankato Free Press. “Our View: Pass Computer Chip Bill for U.S. Plants.”