News analysis · August 14, 2022
CHIPS and Science Act: What Small Manufacturers Should Know
CHIPS and Science Act funding is now law, and it puts $52.7 billion toward American semiconductor research, development, manufacturing and workforce training. President Biden signed the bill on August 9, 2022. Most of the money will go to chipmakers. Small manufacturers that supply them may still feel the effect.
What the law is
The bill moved through Congress as H.R. 4346 and became Public Law 117-167 on August 9. It is a large package. Part of it pays for chip factories and chip research. Part of it backs wider science work, such as new programs at the National Science Foundation and more funding for the Department of Energy and the National Institute of Standards and Technology.
The White House says the United States makes about 10 percent of the world's chips today and none of the most advanced ones. It also says the country relies on East Asia for 75 percent of global production. The law is meant to change that balance.
Where the $52.7 billion goes
The White House fact sheet breaks the money into three parts.
- $39 billion for manufacturing incentives. This includes $2 billion for the older, legacy chips used in cars and defense systems.
- $13.2 billion for research and workforce development.
- $500 million for international information and communications technology security and chip supply chain work.
The law also creates a 25 percent investment tax credit. It covers capital spending on factories that make semiconductors and the equipment used to make them. The same summary says the incentives are meant to create tens of thousands of construction jobs and thousands more skilled manufacturing jobs.
The rules that come with the money
The funds carry conditions. Companies that take them may not build certain facilities in China or other countries of concern. They also may not use the money for stock buybacks or shareholder dividends. Facilities built with these funds must pay Davis-Bacon prevailing wage rates to construction workers.
Recipients must also show real investment in workers and communities. The White House says that includes opportunities for small businesses. A small manufacturer should watch for how that language turns into rules and contract terms. The details have not been written yet, and agencies still have work to do.
How suppliers may be affected
A new chip plant needs more than machines. It needs parts, tooling, packaging, cleaning supplies, metal work, electrical work, trucking and plenty of skilled labor. Those needs can reach well past the plant gate. Small shops in the same region may see more requests for quotes as projects get under way.
The news from this week points the same way. The White House says companies announced nearly $50 billion in new chip investment in the days around the signing. Micron said it would invest $40 billion in memory chip production. Qualcomm and GlobalFoundries announced a partnership that includes $4.2 billion for chips made at a New York plant. These are company plans, and building takes years.
Not every small manufacturer will benefit. Shops far from a chip project, or without the quality systems that chipmakers expect, may see little change at first. That is a judgment, not a promise.
Other parts of the law
The act reaches beyond chip plants. It authorizes $10 billion for regional innovation and technology hubs. These hubs would bring together governments, schools, unions and businesses. It also authorizes a $1 billion RECOMPETE pilot at the Economic Development Administration for distressed communities. And it includes $1.5 billion to promote wireless equipment built on open and interoperable radio access networks.
The law sets up a new technology, innovation and partnerships directorate at the National Science Foundation. It also authorizes new training money for science, technology, engineering and math, from K-12 to community college and beyond. For a manufacturer that struggles to hire, that training money is worth following.
One caution matters here. Many of these programs are authorized, which means Congress has allowed the spending. It still has to be provided later. Do not plan around money that has not been appropriated.
What to do now
Small manufacturers do not need to act this week. A few steps cost little and help later.
- Find out whether a chip project is planned in your state or a nearby one.
- Check your quality certifications and make sure they are current.
- Ask your customers if they supply chipmakers or expect to.
- Watch for federal notices on how funding applications will work.
- Talk with local community colleges about training for your staff.
The White House also said it is launching an interagency working group on permitting for high-tech manufacturing. Its goal is faster and better coordinated reviews of federally funded projects. That could shorten the time before a plant starts to buy from local suppliers.
Sources
- The White House, "FACT SHEET: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Counter China," August 9, 2022.
- Congress.gov, H.R. 4346, 117th Congress, Became Public Law No. 117-167 on August 9, 2022.