CHIPS and the Science Act will unlock billions of dollars for the US science and technology sector. Morrison & Foerster LLP – Government Contracting Insights
By injecting billions of dollars into the U.S. semiconductor industry and allocating billions more to scientific research and development, what is called CHIPS and the Science Act of 2022 will be announced by President Biden on August 9, 2022. was signed into law by The House Act is intended to “strengthen America’s manufacturing, supply chains, and national security, and invest in research and development, technology, and the workforce of the future,” helping America “win the 21st-century race.” It is intended to help  This law consists of two parts. The first part, the cleverly named Create Incentives to Help Semiconductor Manufacturing (“CHIPS” Act), will provide more than $50 billion in federal funding to boost domestic semiconductor and microchip manufacturing and research. is authorized. A second, larger division, the Research, Development, Competition, and Innovation Act (now simply called “Science Law”), pours $170 billion in new research and innovation funding into various federal agencies. increase. Many of these funds go to contractors and grantees looking for additional funding to support their research and development initiatives.
The CHIPS Act provides $52.7 billion over five years to accelerate semiconductor research, development, manufacturing and workforce development. Funds have been allocated to selected institutions as follows:
* Estimate only. Tax credits are not included in the $52.7 billion spending budget.
One somewhat controversial aspect of the CHIPS Act is the clawback provision included in tax credit incentives. The law creates a 25% tax credit for investments in semiconductor manufacturing, including the manufacture of special tools required for chip production. The clawback provisions allow recipients of these incentive funds to expand new manufacturing capacity or to support the semiconductor industry in “countries of concern” (currently defined to include China, Russia, Iran and North Korea). You won’t be able to build or make any other “significant trades”. Avoid facing commercial enforcement action to recover all incentives offered for 10 years. The details remain vague, however, as Commerce must enact implementation rules to define relevant terms and determine details about how these guardrails will work.
Implementation priorities are emerging. On August 25, 2022, President Biden issued an executive order setting out the administration’s priorities. state, local, tribal, and territorial governments; the private sector; research universities; labor unions; and our allies. These priorities include:
- Protect taxpayer resources by ensuring that fund recipients are held accountable for compliance with funding opportunity requirements.
- Meet economic, sustainability, and national security needs, including building domestic microelectronics manufacturing capacity.
- Ensure long-term leadership in the microelectronics sector through support for research and innovation.
- Promote private sector investment in production, breakthrough technologies, and worker and workforce development.
- Serving traditionally underserved people through the creation of high-paying, highly-skilled union jobs and opportunities for start-ups, small businesses, minority-owned, veteran-owned and women-owned businesses. Generate benefits that impact a wide range of stakeholders, including Partner with state, local, tribal, territorial, and higher education institutions.When
- Strengthen and expand the regional manufacturing and innovation ecosystem, including investments in suppliers, manufacturers, workforce development, basic and translational research, and related infrastructure and cybersecurity across the microelectronics supply chain.
The Executive Order also established a Governing Council to coordinate policies related to the CHIPS Act. The Council is co-chaired by the Assistant to the President for Economic Policy, the Assistant to the President for National Security Affairs, and the Director of the Office of Science and Technology Policy. Other Steering Committee members include representatives from a wide range of government agencies, including the Secretaries of State, Treasury, Defense, Commerce, Labor and Energy. Director of the Office of Management and Budget; Administrator of the Small Business Administration; Director of National Intelligence; Assistant to the President for Domestic Policy. Chair of the Economic Advisory Board; Director of the National Cyber Agency; Director of the National Science Foundation.
Known as “the largest five-year investment in public research and development in U.S. history,” the Science Act empowers four federal agencies to conduct “curiosity-driven” and “use-inspired translational” research and development. We are providing nearly $170 billion to help.  The passage of the Science Act marks a reversal of the unfortunate trend of declining federal R&D spending, both as a percentage of GDP and relative to other developed nations. The goals of science law include, in addition to general advances in research, the creation of new technology hubs, increased participation in research by underrepresented populations and regions, and efforts to combat theft of U.S. intellectual property. There is an enhancement of Scientific Act Establishes New Programs or Initiatives Similar to the CHIPS Act, federal agencies must promulgate implementing regulations before distributing authorized funds.
The following chart shows the breakdown of new funding for the four recipient institutions.
* The Science Act expands approval and support for several existing NASA programs, such as the Artemis Lunar Program and the International Space Station, but does not approve new funding.
Scientific law creates several new opportunities for government contractors and grant recipients. Some of the new and expanded areas of R&D funding are:
- NSF’s Directorate of Technology, Innovation and Partnerships ($20 billion), which invests in strategic translational sciences including artificial intelligence, quantum computing, advanced manufacturing, 6G communications, energy, materials science, and other critical technologies.
- NSF research on ocean acidification activity. Includes long-term data stewardship, access to ocean and coastal acidification data ($20 billion).
- NIST works to advance research and standards in quantum information science, artificial intelligence, cybersecurity, advanced communications technologies, and semiconductors ($6.9 billion).
- Tripled NIST funding for the Manufacturing Extension Partnership ($2.23 billion) to support small and medium-sized manufacturers with cybersecurity, employee training, and supply chain resilience.
- NIST’s national supply chain database that assists companies in supplier scouting with the goal of minimizing supply chain disruption.
- A commerce deal ($10 billion) to create 20 “regional technology and innovation hubs” in regions that are not major technology centers, focused on technology development, job creation, and expanding America’s innovation capacity.
- DOE’s Fundamental Energy Research Program ($14.5 billion) on artificial photosynthesis, energy storage, nuclear matter, carbon materials, and sequestration to advance energy technology.
- DOE research, development, and demonstrations in building technologies, sustainable transportation, advanced manufacturing, industrial emission reduction technologies, advanced materials, and renewable power ($11.2 billion).
- DOE High Energy Physics Program ($6.5 billion);
- DOE Advanced Scientific Computing Research Program ($6 billion) for high-end computing systems and computer science research.
- DOE Fusion Energy Science Program ($5 billion); and
- DOE’s Biological and Environmental Research Program on Earth and Environmental Systems, including the development of engineered ecosystems ($4.5 billion).
The CHIPS Act represents a change in federal policy regarding industrial subsidies. The United States, which has long disliked subsidies that could distort markets favored by other countries, has embraced the mechanism (at least for this important sector of the economy). Scientific law has long been the most comprehensive infusion of resources into research and development. This law creates significant opportunities for companies and research institutes. We closely monitor proposed and final regulations, tracking where agencies allocate funding and what opportunities, inventions and discoveries are attributed to these programs.
 White House Office, Fact Sheet: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Counter China (Aug. 9, 2022).
CHIPS and Science Act Fact Sheet (Prepared by House Leadership)