March 01, 2023

U.S. Department of Commerce Issues First Notice of Funding Opportunity for CHIPS and Science Act

4 min

On February 28, 2023, the U.S. Department of Commerce issued the first Notice of Funding Opportunity under the CHIPS and Science Act, a 2022 law designed to increase the competitiveness of U.S. semiconductor manufacturing. With this new funding opportunity comes a large scale of direction and guidance from Commerce about the funding's purpose, key priorities, application process, and timelines. This alert will briefly identify key guidance on these topics.

CHIPS for America funding provides "manufacturing incentives to restore U.S. leadership in semiconductor manufacturing, support good-paying jobs across the semiconductor supply chain, and advance U.S. economic and national security." This comprises $50 billion in investment and awards aimed at the U.S. semiconductor industry, "including $39 billion in semiconductor incentives." The first CHIPS funding opportunity is directed specifically at "projects to construct, expand, or modernize commercial facilities for the production of leading-edge, current-generation, and mature-node semiconductors. This includes both front-end wafer fabrication and back-end packaging." Incentives "will take the form of direct funding, federal loans, and/or federal guarantees of third-party loans."

Funding requirements reveal a mix of economic and social policy priorities, such as increasing private capital and investment, discouraging funding recipients from using awards to buy back stocks instead of investing in manufacturing, developing a diverse and skilled workforce, supporting trade partners, and prioritizing long-term investment plans that will create opportunities for various communities for years to come. For example, applicants are encouraged to explain how they will include "minority-owned businesses, veteran-owned businesses, women-owned businesses, and small businesses as part of any funded project."

Applying for CHIPS for America funding includes a five-step application process. First, potential applicants must submit a statement of interest that "briefly describe[s] the proposed project so that the CHIPS Program Office may gauge interest in the program and plan for further review." Second, there is an optional pre-application. Applicants that opt for the pre-application will receive written feedback and recommendations about next steps in the application process. Third, applicants must submit a full application. This may result in further feedback and negotiation with the Program Office. Fourth, applications deemed "reasonably likely to receive an award" will enter a due diligence phase wherein applicants will "provide additional information on national security, financial, environmental, and other issues." During due diligence, the CHIPS Program Office will engage with outside advisors in a process to validate the information in the application at the applicant's expense. Fifth and finally, after successful due diligence, an award is issued.

Commerce is accepting statements of interest starting February 28, 2023. It will begin accepting pre-applications for leading-edge projects on March 31, 2023, with pre-applications for current-generation, mature-node, and back-end projects starting May 1, 2023. Leading-edge full applications may be submitted March 31, 2023, with full applications for current-generation, mature-node, and back-end starting June 26, 2023.

Two important requirements will impact the timing of applications. First, a potential applicant must submit its statement of interest at least 21 days before submitting a pre-application or full application. Second, even though an applicant need not have an active registration to apply, an active registration is required before awards may be issued. Commerce guidance documents note that this process usually takes only a few days to a couple of weeks. There is a risk, however, that the registration process could take six months or longer. Interested parties should therefore begin the registration process as soon as possible.

The first Notice of Funding Opportunity under the CHIPS for America program presents a compelling opportunity for semiconductor manufacturers large and small to invest in U.S.-based manufacturing. The application process will require, by design, careful planning and plenty of patience on the part of applicants. Venable's team of federal funding experts stands ready to help interested parties to determine the potential benefits of applying for CHIPS funding, and to chart a course through the entire process, including but not limited to guiding applicants that are new to through the registration process and understanding the strings and compliance requirements that will accompany this federal funding.