Frequently Asked Questions: CHIPS Act of 2022 Provisions and Implementation

Semiconductors are a uniquely important enabling technology, fundamental to nearly all modern industrial and national security activities, as well as essential building blocks of other emerging technologies, such as artificial intelligence, autonomous systems, and quantum computing. The federal government and U.S. companies pioneered semiconductor development throughout the 1960s and 1970s, and the United States led the world in semiconductor manufacturing. A variety of factors subsequently led to a concentration of semiconductor manufacturing in East Asia. These factors included other nations subsidizing the construction and operation of semiconductor fabrication facilities (fabs); lower operating costs abroad; outsourcing of manufacturing by fabless semiconductor design firms that previously manufactured their own chips; and a preference for being physically proximate to electronics business clusters in the region. The U.S. share of global semiconductor fabrication capacity fell from about 36% in 1990 to about 10% in 2020. Policymakers became increasingly concerned about the potential implications of this trend for economic and national security reasons, and noted the risks associated with ensuring an adequate supply of semiconductors resulting from potential disruption of East Asian manufacturing and shipping due to trade disputes, natural hazards, or armed conflict. The COVID-19 pandemic and consequent interruption of semiconductor supplies to the United States—and the subsequent effects on U.S.-based industries—bolstered these concerns. U.S. overreliance on semiconductor production in East Asia and its vulnerability to disruption has been an ongoing source of concern for many Members of Congress. The National Defense Authorization Act for Fiscal Year 2021 (2021 NDAA, P.L. 116-283) authorized an incentive program for building and equipping semiconductor fabs in the United States, as well as research and development (R&D) activities to support U.S. leadership in semiconductor technology. In July 2022, Congress enacted the CHIPS and Science Act (P.L. 117-167), which President Biden signed into law in August 2022. The CHIPS Act of 2022 (Division A of P.L. 117-167) establishes and appropriates $39.0 billion to a CHIPS for America Fund to bolster semiconductor manufacturing capacity in the United States by providing financial incentives for building, expanding, and equipping domestic fabrication facilities and companies in the semiconductor supply chain. The fund also provides $11.0 billion for semiconductor R&D activities at the National Institute of Standards and Technology and in partnership with U.S. industry through a National Semiconductor Technology Center, a National Advanced Packaging Manufacturing Program, and the establishment of up to three Manufacturing USA institutes. P.L. 117-167 also provided appropriations for three additional funds that seek to bolster U.S. semiconductor capabilities for national defense, workforce development, and international cooperation. Congress may wish to exercise its oversight authority with respect to implementation of the programs and policies in the act and their effectiveness in addressing U.S. economic and national security concerns. Among other potential oversight issues: the allocation of incentive funding among various types of chip manufacturing (e.g., logic chips and memory chips, mature chips and leading-edge chips); the adequacy of funding to meet the act’s objectives; and the effectiveness of guardrails established in the act to prevent the use of incentive funding from enabling further investments in countries of concern or from being used for stock buybacks or dividends.