CHIPS And Science Act Makes Billions of Dollars Available to US Science and Technology Sectors | Morrison & Foerster LLP – Public Procurement Overview

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Pumping billions of dollars into the American semiconductor industry and appropriating billions more for scientific research and development, what is now colloquially known as the CHIPS and the science law of 2022 was signed into law by President Biden on August 9, 2022. According to the White House, the law aims to “strengthen American manufacturing, supply chains, and national security, and invest in research and development, science, and research.” technology and the workforce of the future,” to help America “win the race for the 21st century.” [1] The act has two parts, the first, aptly titled Creating Useful Incentives for Semiconductor Production (“CHIPS” Act), authorizes more than $50 billion in federal funding to support domestic semiconductor manufacturing and research. conductors and microchips. The second and largest division, the Research and Development, Competition and Innovation Act (now simply called the “Science Act”), injects $170 billion in new research and innovation funding into various federal agencies. Many of these funds, in turn, will be made available to entrepreneurs and grantees seeking additional funds to support research and development initiatives.

The CHIPS law

The CHIPS Act provides $52.7 billion over five years to accelerate semiconductor research, development, manufacturing and workforce development. Funding was allocated to selected agencies as follows:

* Estimate only; tax credit not included in the $52.7 billion credit.

A somewhat controversial aspect of the CHIPS Act is the clawback provision included in the tax credit incentive. The law creates a 25% tax credit for investments in semiconductor manufacturing, including the manufacture of specialized tools needed to produce chips. The clawback provision prevents recipients of these incentive funds from expanding or creating new manufacturing capacity or performing other “significant transactions” that support semiconductor industries in “countries of concern” ( currently defined as including China, Russia, Iran, and North Korea) for ten years, lest they be subject to enforcement action by the Department to claw back any inducements provided. The details remain hazy, however, as Commerce will need to promulgate implementing regulations to define the relevant terms and determine the details of how these safeguards will operate.

Implementation priorities emerge. On August 25, 2022, President Biden issued a Executive Decree which sets out the administration’s priorities, to be achieved through collaboration between the White House; State, local, tribal and territorial governments; the private sector; research universities; unions; and our allied countries. These priorities include:

  • Protect taxpayer resources by ensuring funding recipients are held accountable for compliance with funding opportunity requirements;
  • Respond to economic, sustainability and national security needs, including building national microelectronics manufacturing capabilities;
  • Provide long-term leadership in the microelectronics sector, through support for research and innovation;
  • Catalyze private sector investment in production, advanced technologies, and worker and workforce development;
  • Generate benefits that impact a wide range of stakeholders, including the traditionally underserved, through the creation of well-paying, highly-skilled unionized jobs and opportunities for startups, small businesses and owned businesses to minorities, veterans and women and by building partnerships with state, local, tribal and territorial governments and institutions of higher education; and
  • Strengthen and expand regional manufacturing and innovation ecosystems, including investing in suppliers, manufacturers, workforce development, basic and translational research, and related infrastructure and cybersecurity throughout of the microelectronics supply chain.

The executive order also established a governing council to coordinate policy related to the CHIPS Act. The Council will be 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 will include a wide range of government agency representatives, including the Secretaries of State, Treasury, Defense, Commerce, Labor and Energy; the director of the office of management and budget; the administrator of the Small Business Administration; the Director of National Intelligence; the President’s Assistant for Domestic Policy; the Chairman of the Council of Economic Advisers; the National Cyber ​​Director; and the director of the National Science Foundation.

The scientific law

The Science Act, billed as “the largest five-year investment in public R&D in the nation’s history,” provides four federal agencies with nearly $170 billion to support “curiosity-driven” research and development and “use-inspired and translational”. [2] The passing of the Science Act marks the reversal of an unfortunate trend of declining federal spending on R&D, both as a percentage of GDP and in comparison to other advanced economies. Among the goals of the Science Act, in addition to the general advancement of research, are to create new technology hubs, to increase research participation from underrepresented populations and geographies, and to strengthen efforts to combat against intellectual property theft in the United States. As with the CHIPS Act, where science law establishes new programs or initiatives, federal agencies will need to enact implementing regulations before distributing authorized funds.

The following table illustrates the distribution of new funds for four recipient organizations:

CHIPS table

* The Science Act extends authorization and support for several existing NASA programs, including the Artemis Moon program and the International Space Station, but does not authorize new funding.

The Science Act creates new opportunities for government contractors and grant recipients. Some of the new and expanded areas of R&D funding are:

  • An NSF Direction for Technology, Innovation and Partnerships to invest in strategic translational science, including artificial intelligence, quantum computing, advanced manufacturing, 6G communications, energy, materials science and other critical technologies ($20 billion);
  • NSF studies of ocean acidification activities, including long-term data management and 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);
  • NIST tripled funding for the Manufacturing Extension Partnership, to support small and medium-sized manufacturers with cybersecurity, workforce training, and supply chain resilience ($2.23 billion) ;
  • A National NIST Supply Chain Database to help companies source suppliers, with the goal of minimizing supply chain disruptions;
  • The trade will create 20 “regional technology and innovation hubs” in areas that are not leading technology hubs, focusing on technology development, job creation and expanding the innovation capacity of United States ($10 billion);
  • DOE Basic Energy Research Programs for Artificial Photosynthesis, Energy Storage, Nuclear and Carbonaceous Materials, and Sequestration to Advance Energy Technologies ($14.5 billion);
  • DOE research, development, and demonstration in building technologies, sustainable transportation, advanced manufacturing, industrial emissions reduction technology, advanced materials, and renewable energy ($11.2 billion);
  • DOE High Energy Physics Program ($6.5 billion);
  • DOE’s Advanced Scientific Computing Research Program for High-End Computing Systems and Computer Science Research ($6 billion);
  • DOE Fusion Energy Sciences program ($5 billion); and
  • DOE’s Biological and Environmental Research Program for Earth and Environmental Systems, including the Development of Artificial Ecosystems ($4.5 billion).

Conclusion

The CHIPS Act marks a turning point in federal policy on industrial subsidies. Long opposed to potentially market-distorting subsidies favored by other countries, the United States has now embraced the mechanism (at least for this critical sector of the economy). The Science Act is the most comprehensive injection of resources into research and development in a long time. Significant opportunities for businesses and research institutes will arise from this legislation. We will carefully monitor proposed and final implementing regulations, and track where agencies allocate funds, and what opportunities, inventions and discoveries can be attributed to these programs.

[1] White House Office, BACKGROUNDER: CHIPS and the Science Act will cut costs, create jobs, strengthen supply chains and counter China (August 9, 2022).

[2]CHIPS and Science Law Fact Sheet as prepared by the management of the Chamber

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