Semiconductors, CHIPS for America, and Appropriations in the U.S. Innovation and Competition Act (S. 1260)

Semiconductors, CHIPS for America, and Appropriations in the U.S. Innovation and Competition Act (S. 1260)

January 13, 2022
Semiconductors, CHIPS for America, and Appropriations in the
U.S. Innovation and Competition Act (S. 1260)
Global Landscape for Semiconductor Fabrication
foreign firms to focus on China and helping to advance its
Semiconductors, or computer chips, enable nearly all
domestic capabilities through sales of equipment, tools, and
industrial activities, including systems that undergird U.S.
software; technology licensing; and investment.
industrial competitiveness and national security. They are
instrumental in technologies that address a wide spectrum
The following sections of this In Focus discuss selected
of national needs, such as defense weapon systems, medical
authorization provisions in Title XCIX (Creating Helpful
equipment, automobiles, industrial machinery, consumer
Incentives to Produce Semiconductors (CHIPS) for
electronics, and environmental systems.
America) of the William M. (Mac) Thornberry National
Defense Authorization Act for Fiscal Year 2021 (2021
Semiconductor design and manufacturing is a global
NDAA, P.L. 116-283), as well as related appropriations
enterprise, with materials, design, fabrication, assembly,
provisions included in the proposed United States
testing, and packaging operating across national borders.
Innovation and Competition Act (USICA, S. 1260). No
U.S. industry dominates many parts of the semiconductor
House bills include CHIPS for America appropriations.
supply chain, such as chip design. Six U.S.-headquartered
or foreign-owned semiconductor manufacturing companies
CHIPS for America (Title XCIX, 2021 NDAA)
currently operate 20 fabrication facilities , or fabs, in the
Several bills were introduced in the 116th Congress that
United States. However, with the movement of many U.S.
sought to expand U.S. semiconductor fabrication capacity.
firms toward a fabless model (companies that design, but do
Certain provisions from these bills were incorporated into
not manufacture, semiconductors), the U.S. share of
CHIPS for America. The NDAA authorized a number of
semiconductor fabrication capacity was 12% in 2020, down
programs and activities (described below).
from 13.8% in 2015, continuing a long-term decline from
around 40% in 1990. The U.S. share is expected to fall
Section 9902 of the act authorizes the Secretary of
further as planned new fabs open globally in the next few
Commerce to provide financial assistance to “covered
years, particularly in East Asia. In 2019, nearly four-fifths
entities” to incentivize investment in facilities and
of global fab capacity was in Asia—South Korea (28%),
equipment in the United States for semiconductor
Taiwan (22%), Japan (16%), and China (12%).
fabrication, assembly, testing, advanced packaging, or
research and development of semiconductors. Covered
Concerns About U.S. Fabrication Capacity
entities include “a private entity, a consortium of private
Some Members of Congress have expressed concerns about
entities, or a consortium of public and private entities with a
the economic and military implications of a loss of U.S.
demonstrated ability to substantially finance, construct,
leadership in parts of the semiconductor supply chain and,
expand, or modernize a facility relating to fabrication,
relatedly, the adequacy of U.S.-based semiconductor
assembly, testing, advanced packaging, or research and
fabrication capacity to meet U.S. commercial and defense
development [R&D] of semiconductors.”
needs. Others have become increasingly concerned about
the concentration of production in East Asia and related
Under the act, a covered entity may submit an application
vulnerability of semiconductor supply chains to disruption
for financial assistance to the Secretary of Commerce.
in the event of a trade dispute or military conflict, as well as
Subject to availability of funds and considerations specified
other risks such as product tampering and intellectual
in the act, the Secretary may determine the appropriate
property theft. These concerns have been exacerbated by
amount and funding type for each award made to a covered
the semiconductor supply chain challenges that emerged
entity, up to $3.0 billion. Awards in excess of $3.0 billion
during the Coronavirus Disease 2019 (COVID-19)
may be made if the Secretary, in consultation with the
pandemic due to shifting industrial and consumer demands,
Secretary of Defense and the Director of National
and production declines and transportation/logistics
Intelligence, recommends such an award to the President,
disruptions. Some Members are concerned that China’s
and the President certifies and reports to the appropriate
state-led efforts to develop an indigenous, vertically
committees of Congress, that a larger investment is
integrated semiconductor industry, unprecedented in scope
necessary to significantly increase the proportion of reliable
and scale, if successful, could significantly shift global
domestic supply of semiconductors relevant for national
semiconductor production and related design and research
security and economic competitiveness.
capabilities to China. China’s government outlays ($150
billion to date, according to the plan and industry
Section 9906(c) directs the Secretary of Commerce, in
estimates), its role as a central production point for global
collaboration with the Secretary of Defense, to establish a
consumer electronics, and internal Chinese demand are
National Semiconductor Technology Center to conduct
generating strong incentives and pressures on U.S. and
research and prototyping of advanced semiconductor
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link to page 2 Semiconductors, CHIPS for America, and Appropriations in the U.S. Innovation and Competition Act (S. 1260)
technology to strengthen the economic competitiveness and
USICA would also provide additional funding for activities
security of the domestic supply chain. The center is to be
authorized by Section 9906(c), (d), (e), and (f) of P.L. 116-
operated as consortium, with participation from the private
283, in aggregate, for FY2023 ($2.0 billion), FY2024 ($1.3
sector, the Department of Energy, and the National Science
billion), FY2025 ($1.1 billion), and FY2026 ($1.8 billion).
Foundation. The center’s work is to emphasize advanced
test, assembly, and packaging capability in the domestic
These appropriations, totaling $50.2 billion over the
semiconductor ecosystem; materials characterization,
FY2022-FY2026 period, are summarized in Table 1.
instrumentation and testing for next-generation
microelectronics; virtualization and automation of
Table 1. S. 1260 Appropriations for CHIPS for
maintenance of semiconductor machinery; and metrology
America (Title XCIX of P.L. 116-283) Provisions
for security and supply chain verification.
(in billions of dollars)
Section 9906(d) directs the Secretary of Commerce to
P.L. 116-283
FY
FY
FY
FY
FY
establish a National Advanced Packaging Manufacturing
Section
2022 2023 2024 2025 2026
Total
Program, led by the Director of the National Institute of
9902
19.0
5.0
5.0
5.0
5.0
39.0
Standards and Technology (NIST), to strengthen

semiconductor advanced test, assembly, and packaging
9906(c)
2.0
2.0
capability in the United States, and to coordinate its efforts

with the National Semiconductor Technology Center,
9906(d)
2.5
2.5
authorized by Section 9006(c), and the Manufacturing USA
9906(e) and (f)
0.5

0.5
institute, authorized by Section 9006(f) (discussed below).

9906(c), (d),
2.0
1.3
1.1
1.8
6.2
Section 9906(e) authorizes the Director of NIST to conduct
(e), and (f)
an R&D program to enable advances and breakthroughs in
Total
24.0
7.0
6.3
6.1
6.8
50.2
measurement science, standards, material characterization,
instrumentation, testing, and manufacturing capabilities for
Source: CRS analysis of P.L. 116-283, S. 1260.
next-generation microelectronics metrology, and to ensure
Note: Table does not include appropriations for two related funds
U.S. competitiveness and leadership in microelectronics.
established in S. 1260 but not mentioned in P.L. 116-283. See text.
Section 9906(f) authorizes the establishment of a
Section 1002(b) of USICA also would establish a CHIPS
Manufacturing USA institute to pursue research in support
for America Defense Fund to support research,
of the virtualization and automation of maintenance of
development, test and evaluation; workforce development;
semiconductor machinery; the development of new
and other requirements unique to the Department of
advanced test, assembly and packaging capabilities; and the
Defense and the intelligence community. The act would
development and deployment of educational and skills
provide appropriations of $400 million per year for fiscal
training curricula needed to support the industry sector and
years 2022-2026 for the fund.
to ensure the United States can build and maintain a trusted
and predictable talent pipeline.
Section 1002(c) of USICA would establish a CHIPS for
America International Technology Security and Innovation
USICA Appropriations for CHIPS for America
Fund to provide for international information and
USICA passed the Senate on June 8, 2021, by a vote of 68-
communications technology security and semiconductor
32. Section 1002(a) would provide emergency
supply chain activities, among other things. The act would
appropriations for certain activities authorized in CHIPS for
provide appropriations of $100 million per year for fiscal
America:
years 2022-2026 for the fund.
 $39.0 billion for the semiconductor incentives
authorized by Section 9902 of P.L. 116-283, including
Related CRS Products
$19.0 billion for FY2022 and $5.0 billion for fiscal
CRS Report R46581, Semiconductors: U.S. Industry, Global
years 2023 through 2026;
Competition, and Federal Policy, by Michaela D. Platzer, John F.
Sargent Jr., and Karen M. Sutter.
 $2.0 billion in FY2022 for the establishment of the
CRS Report R46703, Manufacturing USA: Advanced
National Semiconductor Technology Center authorized
Manufacturing Institutes and Network, by John F. Sargent Jr.
by Section 9906(c) of P.L. 116-283;
CRS Report R46767, China’s New Semiconductor Policies: Issues
 $2.5 billion in FY2022 for the National Advanced
for Congress, by Karen M. Sutter.
Packaging Manufacturing Program authorized by

Section 9906(d) of P.L. 116-283; and
John F. Sargent Jr., Specialist in Science and Technology
 $500.0 million for NIST microelectronics research
Policy
authorized by Section 9906(e) of P.L. 116-283 and the
Karen M. Sutter, Specialist in Asian Trade and Finance
semiconductor research-focused Manufacturing USA
institute authorized by Section 9906(f) of P.L. 116-283.
IF12016

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Semiconductors, CHIPS for America, and Appropriations in the U.S. Innovation and Competition Act (S. 1260)

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