Commerce Secretary Will Accept Applications for Federal Incentives to Build Chip Manufacturing Facilities in the U.S.

By LSN Partners on February 24, 2023

On Thursday, Commerce Secretary Gina Raimondo announced that the Department would begin to accept applications early next week from semiconductor manufacturers that seek federal incentives to build and expand chip manufacturing facilities in the U.S.

Sec. Raimondo said the Commerce Department plans to award $39 billion of the $52 billion by this summer that Congress appropriated last year as part of the CHIPS and Science Act (PL 117-167), which aims to restore U.S. competitiveness in semiconductor manufacturing as well as research in several advanced technologies. Another $11 billion would go to establishing research and development centers in collaboration with universities, companies, and allies worldwide. Details about this portion are forthcoming.

According to Sec. Raimondo, the federal dollars are “intended to incentivize companies to manufacture semiconductors in America. We need to make sure that at the end, the United States has at least two new large-scale clusters” of manufacturing facilities that produce leading-edge chips.

Lawmakers and the Biden administration have said that the legislation aims to reverse the decline in U.S. chip manufacturing, which fell to 11 percent of the global fabrication capacity in 2019 compared with 40 percent in 1990. Taiwan Semiconductor Manufacturing Company (“TSMC”) and South Korea’s Samsung are the world’s leading producers, while China invests heavily to build capacity.

Sec. Raimondo said the United States depends on TSMC for 92 percent of the high-end chips needed in various industries.

Intel, Micron, IBM, Global Foundries, Samsung, TSMC, and others have tied their plans to build or expand semiconductor fabrication facilities, or fabs, in the United States to get federal grants. But it remains to be seen which company will win, the amount it will receive, and whether failure to win grants will diminish their investment plans.

Intel has said it could invest as much as $100 billion over the next decade to build one of the world’s largest chip-making complexes in Ohio that may include as many as eight fabs. Still, the initial investment is about $20 billion. The company also has facilities in Arizona and New Mexico.

Micron has said it plans to invest $100 billion over the next two decades to build fabs in upstate New York. TSMC and Samsung also are building U.S. facilities and expect to receive U.S. manufacturing incentives since the legislation does not distinguish between U.S. and foreign companies. TSMC is building a $12 billion facility in Arizona. Samsung is developing a $17 billion facility near Taylor, Texas, and has said it could invest up to $200 billion to expand its current facilities.