US CHIPS Act- Opportunities and Issues for the US semiconductor industry

By Dan Tracy, Sr. Director, TECHCET

San Diego, CA, April 13, 2023: Countries around the world view semiconductor manufacturing as vital for economic growth and national security, as devices power all aspects and sectors of the global economy. Across the globe, politicians, government officials, and semiconductor industry leaders deem to revitalize local semiconductor manufacturing through government-initiated programs and subsidies to strengthen or re-shore domestic semiconductor manufacturing. Some examples are shown in the table below.

Country/Region Government Initiative
United States US Chip Act: US$52B program, plus local and state programs
Europe European Chips Act: proposed €43B. Proposed though not finalized
Japan $2.8B; up to 1/3 for chips (power, controllers, analog); up to ½ for raw materials
South Korea Korean Chips Act: financial, regulatory, and tax incentives totaling 340 T Won (~US$259B)
China US$1.4T pledged for over 5-10 years


For the US, the current CHIPS Act is reminiscent of initiatives in the late 1980s to launch SEMATECH, a partnership between the government and a number of US chipmakers, to counter the growing dominance to device makers in Japan. The SEMATECH initiative was successful in re-establishing the prominence of the US domestic chip making industry; however, globalization and outsourcing/foundry opportunities resulted in strong industry investments across Asia since SEMATECH was launched.

As such, it is estimated that the US chip fabrication global share declined from about 37% in 1990 to about 10% to 12% by 2020. While the share has declined, US semiconductor production still entails 2.3 million Wafer Starts per Month capacity (200 mm equivalent) spread over 27 300 mm production lines; roughly 40 200 mm production lines; and numerous specialty lines producing MEMs/sensors and optoelectronic components.

So, while there is a sizeable chip manufacturing base in the US, politicians and industry leaders seek to revitalize and restore the prominence of chip fabrication in the US given the declining market share and strategic importance of the industry. Plans for such have been in the works since 2019, under the name CHIPS for America Act, and have garnered, for the most part, bipartisan political support. The lawmaking process does involve back-and-forth and negotiations, so took some time for the legislative process to produce a final bill.

The US CHIPS Act signed into law by President Biden in August 2022. The signed CHIPS Act includes $39 billion in tax benefits and other incentives for companies, including non-US headquartered companies, to build new chip manufacturing plants in the US. The CHIPS Act is a 5-year funding program that includes the following:

  • For fiscal year 2022, US$19 billion has been allocated, “including the US$2 billion for legacy chip production funding. US$5 billion each year from FY23 through FY26.”
  • “Also US$11 billion appropriated over 5 years for R&D and workforce development programs, and US$2 billion appropriated for on-shore, university-based prototyping, lab-to-fab transition of semiconductor technologies, etc.”

Of interest and concern to companies receiving CHIPS Act support is Section 103 of the legislation, which “stipulates that recipients of Federal incentive funds are prohibited from expanding or building new manufacturing capacity for “certain advanced semiconductors in specific countries that present a national security threat to the United States.” This stipulation has raised concerns and issues concerning possible recipients that currently have manufacturing in China. This is a subject of on-going negotiation between companies and governments with US officials.

With all of that stated, various US government departments and agencies worked on implementing a plan and have rolled out the programming for companies to apply for funding support. The first phase of funding occurred in February of this year and is targeted for device makers. The second phase is expected to roll out by May and will be open to supply chain participants, such as semiconductor material suppliers.

The implementation of the CHIPS Act has generated considerable interest across the industry and has spurred numerous investment announcements over the past couple of years and has already resulted in construction and other activities to move projects forward. The below map highlights some of the major fab announcements and locations across the US. Projects include new fabs being built by TSMC and Intel in Arizona. Intel has longer term plans for fabs in Ohio. In addition, Texas Instruments is constructing a new fab in Texas and announced plans for a new one in Utah. Samsung will also invest in Texas. Micron has plans for new fabs in Idaho and New York.

ABOUT TECHCET: TECHCET CA LLC is an advisory services firm expert in market and supply-chain analysis of electronic materials for the semiconductor, display, solar/PV, and LED industries. TECHCET offers consulting, subscription service, and reports, including the Critical Materials Council (CMC) of semiconductor fabricators and Data Subscription Service (DSS). For additional information, please contact, +1-480-332-8336, or go to