What Is the CHIPS and Science Act of 2022?

What Is the CHIPS and Science Act of 2022?

The CHIPS and Science Act of 2022 was signed into law by President Biden on Aug. 9, 2022. The law received bipartisan approval and strong support from the research and business communities.

The act appropriated approximately $52 billion to support semiconductor research and manufacturing. In addition, approximately $200 billion more was allocated for investments in semiconductor and other scientific research, technology, education, and training, with a significant portion of the appropriations, along with incentive tax credits for business, intended to fund the federal share of public-private partnerships. An additional $20 million appropriation was provided to enhance security for members of the U.S. Supreme Court and their families.

Understanding the CHIPS and Science Act of 2022

The CHIPS and Science Act of 2022 has two main objectives: funding programs previously authorized under the CHIPS for America Act of 2021 and authorizing the most extensive, publicly funded, five-year R&D program for applied science and innovation 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. With the U.S. manufacturing only 10% of the chips it needed in 2022, the law was intended to overcome U.S. dependence on foreign sources for semiconductor chips. The  CHIPS and Science Act of 2022 provides funding for projects in the 2021 law. 

The CHIPS and Science Act of 2022 includes provisions to protect U.S. national security interests in research and advanced manufacturing. It prohibits funding the expansion or construction of new advanced semiconductor manufacturing facilities in countries that would present a threat to U.S. national security.

The Act also contains directives to protect critical scientific research and technology from security risks presented by individuals, organizations, and foreign nations.

The Act’s appropriations include $1.5 billion to advance open-architecture, software-based wireless technologies and to spur innovation in the U.S. mobile broadband market.

America’s research and development lag

As much as 85% of productivity growth in the U.S. has stemmed from technological advances. Much of this has come from partnerships between the federal government and the private sector. However, 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 since the 1960s—has prompted the effort to reverse these trends. Increasing the portion of GDP devoted to R&D spending in critical fields is the second main objective of the CHIPS and Science Act of 2022.

The act authorizes, in dollar terms, the most significant 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.

Specific Appropriations in the Act

The table below lists the major funding categories of the CHIPS and Science Act of 2022.

Selected programs and initiatives

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. It targets $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 (USAID), the Export-Import Bank of the United States (EXIM), and the U.S. International Development Finance Corp.—will 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—is intended to spur movement toward open-architecture, software-based wireless technologies, and to fund innovative, “leap-ahead” technologies in the U.S. mobile broadband market.

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, 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): Provides $81 billion for 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 allocates $10 billion to 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 is appropriated $1 billion to support persistently distressed communities with economic development activities.

National Institute of Standards and Technology (NIST) Authorization: The act provides $9.68 billion to NIST to advance research and standards development for industries of the future. This will include, but not be limited to, research on greenhouse gas measurement, digital identity management, biometrics, advanced communications, and artificial intelligence. Subjects covered will include artificial intelligence, cybersecurity, advanced communications technologies, and semiconductors. Other appropriations are set to support small- and medium-size 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 DOE Science and Innovation Provisions”), and to 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 to provide workforce training in energy security and innovation fields.

The Bottom Line

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

Overall, the legislation is lauded 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. The CHIPS and Science Act of 2022 represents a massive investment by the U.S. in science and technology and one of the most decisive moves yet to establish the U.S. as the recognized international leader in semiconductor manufacturing and scientific research and innovation.