U.S. Chip Funding Bill Sets Aside $50 Billion For Semiconductor Manufacturing & 3nm Research

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In a major attempt at overhauling domestic chip production, the United States Senate agreed to end debate on Thursday on an amendment introduced by the Democratic party Senator Chuck Schumer. This amendment covers a broad array of topics, from the semiconductor supply chain to aeronautics, but it starts by appropriating funds from the United States Department of Treasury to the Department of Commerce for funding the Creating Helpful Incentives To Produce Semiconductors For America (CHIPS) section of the 2021 National Defense Authorisation Act (NDAA).

The CHIPS Act authorizes the Commerce Department to engage the private sector in developing leading-edge chip manufacturing processes. It has gained widespread attention due to the rise of Taiwan's Taiwan Semiconductor Manufacturing Company (TSMC).

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U.S. Innovation and Competition Act Focuses On Advanced and Mature Semiconductor Process Nodes

The U.S. Innovation and Competition Act (USICA) amendment is a substitute amendment for the Endless Frontier Act, which the Senate is currently evaluating before a final vote is called to pass it. Senator Schumer introduced it earlier this month, and the body agreed to close debate on it on Thursday.

Following this, the amendment, referred to as S.1502, is being considered by the Senate alongside the complete Endless Frontier Act Bill. While neither the bill nor the amendment has been passed, the fact that a bipartisan group of senators agreed on ending debate for S.1502 is a positive development that might result in it being cleared and being sent to the House of Representatives before landing on President Biden's desk to become public law.

The USICA's salient point when it comes to the semiconductor industry is authorizing $39 billion in funds for the CHIPS Act. Specifically, the funds are reserved for Section 9902 of the Act, which authorizes the Secretary of Commerce to work with entities interested in setting up chip fabrication and packaging facilities inside the United States. Importantly, under Section 9902, individual projects will not secure federal funds above $3 billion. So, assuming that no exceptions are made, the funds authorized by USICA should provide coverage for 13 individual projects.

Intel's Ocotillo campus (pictured above) houses its Fab 42 which manufactures processors on its 10nm process node. Intel has committed to a $20 billion investment to build two facilities in the Ocotillo campus. Image: Intel Corporation

$39 Billion Allocated For Direct Chip Manufacturing Support

However, the funds are not authorized for a single fiscal year. Instead, the amendment allocates funding over five fiscal years, with the first tranche covering investment for the next fiscal year set to start in October this year. The funding for Section 9902 allocated to each fiscal year is as follows:

  • $19 billion for the fiscal year 2022
  • $5 billion for the fiscal year 2023
  • $5 billion for the fiscal year 2024
  • $5 billion for the fiscal year 2025
  • $5 billion for the fiscal year 2026

While the $39 billion is allocated for direct investment into chip fabrication, as a whole, the USICA authorizes roughly $50 billion for the chip sector. In addition to funding Section 9902, it also funds Section 9906 of the CHIPS Act.

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Subsection (c) of this section directs the Secretary of Commerce to coordinate with the Secretary of Defense to establish a National Semiconductor Technology Center. This center will also support new ventures and collaboration between the public and private sectors for developing the 3-nanometer semiconductor process node.

For subsection (c) specifically, the USICA allocates $2 billion for the next fiscal year. Thus, as a whole, $5 billion in funds for Section 9906 will be available during FY2022, with $2.5 billion going towards funding subsection (d) and $500 million for (e) and (f).

Subsections (d), (e) and (f) respectively deal with chip packaging, microelectronics research and the establishment of the Manufacturing USA institute dedicated towards chipmaking machines and other areas.

The next generation of extreme ultraviolet lithography (EUV) machines to manufacture chips will use larger lens apertures to focus more light on wafers for printing semiconductors. This brings its own unique sets of problems since the higher magnification results in 'half' patterns being printed. Image: ASML

After FY2022, the USICA appropriates the following amounts for Section 9906 of the CHIPS Act:

  • $2 billion for the fiscal year 2023
  • $1.3 billion for the fiscal year 2024
  • $1.1 billion for the fiscal year 2025
  • $1.8 billion for the fiscal year 2026

Finally, while the bulk of the amendment focuses on the latest chip technologies, it also allocates $2 billion in the next fiscal year to develop mature technology nodes. These funds will be used to build, test, assemble and/or package mature semiconductor products. While the consumer electronics sector relies on the latest technologies, such as the 5 nanometer and 7-nanometer nodes, the older processes are used for various sectors, including defense and automotive.

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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