CHIPS ACT: NOTICE FUNDING OPPORTUNITY
In July 2022, Congress passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) & Science Act.
Though the CHIPS & Science Act has already been signed into law, some rules on how it will be implemented are still being addressed. On February 28, 2023, the Commerce Department released a Notice of Funding Opportunity (NOFO) for commercial fabrication facilities incentives. This is the first of three funding opportunities provided through the CHIPS and Science Act of 2022. The other notices, which are focused on material suppliers and R&D facilities, will be released in late spring and early fall.
As you may recall from previous GM Engage communication and outreach requests, GM has been supportive of CHIPS funding from the start, especially investments in legacy/mature node technology that will help fortify the auto industry’s transition into an all-electric future. We support the delivery of the appropriated funds in the most efficient and prompt manner possible to ensure the domestic supply chain of legacy/mature nodes is resilient and robust. To do so, we believe the U.S. Department of Commerce should ensure it is supporting this industry through substantial direct funding incentives that compete with foreign subsidies.
GM’s perspective and issues on the new criteria are noted as follows:
For current and mature-node semiconductor funding, the Commerce Department has four main priorities:
1) Increasing production for current-generation and mature-node chips in the U.S. by end of decade;
2) Maintaining technology leadership in compound semiconductors and other specialty chips;
3) Coordinating with allies and partners to ensure resilient production of and access to current-generation and mature node chips; and,
4) Ensuring chipmakers will be able to respond more nimbly to supply and demand shocks.
Five areas of concern for GM and our suppliers in the Notice of Funding Opportunity:
1) CHIPS Direct Fund: Commerce expects that most CHIPS Direct Funding awards will range between 5-15% of the project capital expenditures while the rest of the incentives will be made up of loans and loan guarantees. It is expected that applicants will also utilize the Investment Tax Credit (ITC) to supplement their awards.
- Immediate concerns are that the U.S. semiconductor industry needs grants, not loans, to compete with foreign subsidies. Also, the ITC only provides a 25% credit on a qualifying investment in a semiconductor facility.
2) Incentive Timing: Commerce will begin accepting leading-edge chip funding applications on March 31, while current-generation, mature nodes, and back-end chip manufacturers can submit applications on June 26, 2023. There is currently no estimated time between when the application is submitted, and the award is received.
3) Workforce/Child Care Requirements: Any applicants requesting CHIPS Direct Funding over $150 million must provide a plan for access to onsite childcare for facility and construction workers. Applicants are also required to provide workforce training opportunities for construction and manufacturing employees.
- GM is working to receive greater clarity around the authority to impose childcare requirements as part of the funding applications.
4) Stock Buybacks: CHIPS funding applicants must provide information on their intentions concerning stock buybacks and their plans to reinvest capital into the domestic semiconductor industry.
- The stock buyback language in the CHIPS and Science Act was added by a group of Democratic senators to ensure grant dollars would not be used to offset buybacks. This language, however, does not directly prohibit CHIPS funding recipients from using these incentives to free up their own funds.
- Companies that commit to refrain from stock buybacks for five years will receive preferential treatment in their application.
- Stock buybacks and dividend payments are examples of steps well-managed companies make to reward all shareholders and maintain robust access to the capital markets.
5) Dedicated Funding for Mature Nodes: The recently released CHIPS for America: Vision for Success document references $2 billion for mature nodes. The Strategy for the CHIPS for America Fund document released in September of 2022 states that the Department expects funding for mature and current-generation chips to equal at least a quarter of the available CHIPS incentives funding, or approximately $10 billion.
- It is critical that mature nodes receive, at a minimum, $10 billion from CHIPS Act funding to strengthen the domestic production of these semiconductors.