Chip Proposals Seek to Revive US Manufacturing

By George Leopold

June 26, 2020

Legislation introduced in the U.S. House and Senate seeks to revive the U.S. semiconductor industry via a roughly $12 billion spending package and tax incentives designed to promote technology innovation across the chip ecosystem.

The Senate version of the CHIPS for America Act, as in “Creating Helpful Incentives to Produce Semiconductors,” proposes to revive domestic chip making, fund R&D and secure IC supply chains. Companion legislation also was introduced in the House.

The proposed spending includes $5 billion to launch a manufacturing institute within the Commerce Department focused on chip packaging technology. Semiconductor test, assembly and packaging capabilities have steadily shifted to Asia, and IC packaging innovation is seen as one way to help secure chip supply chains—a priority for the U.S. military.

That effort includes a $500 million investment fund to support a “domestic advanced microelectronics packaging ecosystem.”

Additionally, the packaging initiative would promote IC standards development and workforce training.

The legislation further provides an additional $2 billion for the Defense Advanced Research Projects Agency’s Electronic Resurgence Initiative focused on post-Moore’s Law chip innovation. The agency recently launched a separate chip design effort aimed at securing the Pentagon’s semiconductor pipeline while introducing new system-level design tools.

Another $5 billion in proposed spending is earmarked for basic research on semiconductor manufacturing at the Energy Department and the National Science Foundation.

The CHIPS Act represents the latest front in concerted U.S. efforts to revive U.S. semiconductor manufacturing while addressing supply chain vulnerabilities exposed by the novel coronavirus. “This bill reinvests in this national priority, providing targeted tax incentives for advanced manufacturing in the U.S., funding basic research in microelectronics and emphasizing the need for multilateral engagement with our allies in bringing greater transparency and attention to security and integrity threats to the global supply chain,” said chief sponsor Sen. Mark Warner, D-Va.

The proposal also responds to U.S. “complacency [that] has allowed our competitors—including adversaries—to catch up,” added Warner, whose office did not respond to requests for details.

Among the CHIPS Act’s other provisions are incentives for investing in domestic IC manufacturing, including a 40-percent investment tax credit good through 2024. The credit would be phased out in 2027.

Industry groups backing the legislation noted they have long advocated federal tax credits “to help level the playing field,” a reference to Beijing’s efforts to jumpstart a domestic chip industry.

“The availability of robust incentives in other countries and the lack of a federal U.S. incentive have been key factors driving the location of semiconductor manufacturing facilities overseas,” the industry group SEMI noted in backing the chip legislation.

“As global competitors invest big to attract advanced semiconductor manufacturing to their shores, the U.S. must get in the game and make our country a more competitive place to produce this strategically important technology,” added John Neuffer, president and CEO of the Semiconductor Industry Association.

Added House co-sponsor Michael McCaul, R-Texas: “Ensuring our leadership in the future design, manufacturing and assembly of cutting-edge semiconductors will be vital to United States national security and economic competitiveness. As the Chinese Communist Party aims to dominate the entire semiconductor supply chain, it is critical that we supercharge our industry here at home.”

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