The US Department of Commerce’s (Commerce’s) National Institute of Standards and Technology (NIST) released on June 23, 2023 the second Notice of Funding Opportunity (NOFO) for the “CHIPS for America” incentive program (CHIPS Program). This second funding opportunity is for semiconductor materials and manufacturing equipment projects requiring a more than $300 million capital investment.

In addition to supporting investments in commercial facilities in the United States for the front- and back-end fabrication of leading-edge, current-generation, and mature-node semiconductors, covered in the first NOFO, the second NOFO seeks applications for direct funding, loans, and loan guarantees that will support investments in the construction, expansion, and modernization of (1) commercial facilities in the United States for wafer manufacturing and (2) commercial facilities in the United States for materials used to manufacture semiconductors and semiconductor manufacturing equipment, provided that the capital investment equals or exceeds $300 million.

According to the second NOFO, NIST will release at a later date a separate process for projects below that threshold.

Since the publication of the first NOFO, potential applicants demonstrated widespread interest in the CHIPS Program. The Department has received nearly 400 statements of interest from companies around the world, covering projects across 37 states. The publication of the second NOFO also sets the stage for the Biden administration’s Investing in America tour, during which Commerce Secretary Gina Raimondo and other administration officials will travel to more than 20 states to highlight investments, jobs, and economic opportunities driven by the Investing in America agenda and the implementation of associated legislation, including the CHIPS and Science Act.

Alongside the second NOFO, Commerce also shared its Vision for Success that outlines strategic goals for investment in the semiconductor supply chain, highlighting its goal of (1) strengthening supply chain resilience, (2) promoting US technological leadership, and (3) supporting thriving US fab clusters, including by ensuring that each CHIPS-funded cluster is supported by an ecosystem of reliable suppliers.

When applying for the CHIPS Program funding, applicants should keep these goals in mind to be competitive and to assist Commerce in ensuring that CHIPS funding is used as efficiently and effectively as possible across the semiconductor ecosystem.

FUNDING OPPORTUNITY OVERVIEW

The second NOFO largely builds on the first NOFO, and is published in the form of an amendment. Commerce reiterates that it aims to strengthen US economic and national security, including economic resilience and competitiveness, as well as lay the groundwork for long-term growth and economic sustainability in the US semiconductor industry and promote secure and resilient supply chains.

Applicants for the second NOFO will adhere to the same five-step application method specified in the first NOFO, which method involves a statement of interest, pre-application (optional but recommended), full application, due diligence, and final award issuance and preparation.

Of the six program priority areas that applicants must address, applications will primarily be evaluated on the extent to which they fulfill the program’s economic and national security objectives. The other five program priority areas that will be considered are commercial viability, financial strength, technical feasibility and readiness of the project, workforce development, and broader impacts.

Our previous coverage of the first NOFO contains more details regarding the application process, evaluation criteria, award types, and disbursement schedule.

ELIGIBILITY

The second NOFO continues to provide funding for “covered entities,” a term that includes private entities or consortia of private and public entities that can demonstrate the ability to substantially finance, construct, expand, or modernize a facility in the United States, relating to the fabrication, assembly, testing, advanced packaging, or production of semiconductors, materials used to manufacture semiconductors, or semiconductor manufacturing equipment.

An applicant must demonstrate how the requested CHIPS incentives will facilitate the ability of the applicant to make investments in facilities and equipment in the United States that would not otherwise occur.

Under the second NOFO, funding must be for the construction, expansion, or modernization of (1) commercial facilities in the United States for the front- and back-end fabrication of leading-edge, current-generation, and mature-node semiconductors; (2) commercial facilities in the United States for wafer manufacturing; or (3) commercial facilities in the United States for materials used to manufacture semiconductors and semiconductor manufacturing equipment, provided that the capital investment equals or exceeds $300 million. In addition, the covered entity must have a documented interest in constructing, expanding, or modernizing an eligible facility.

The second NOFO provides definitions of several key terms relating to semiconductor materials and semiconductor manufacturing equipment, including the following:

• Wafer Manufacturing Facilities means facilities for the high-volume production of semiconductor wafers, including wafers made from silicon, silicon carbide, and gallium nitride. These facilities are the sites of ingot production and wafer slicing, lapping, polishing, cleaning, and inspection.
• Semiconductor Materials Facilities means facilities for the manufacture or production, including growth or extraction, of materials used to manufacture semiconductors, which are the chemicals, gases, raw and intermediate materials, and other consumables used in semiconductor manufacturing. Specific examples of semiconductor materials given by Commerce include polysilicon; photoresists and ancillaries (developers, strippers, litho solvents, and anti-reflective and hardmask layers); sputter targets (including tantalum, titanium, and aluminum); and materials specifically used in quantum information systems (such as hafnium and niobium).
• Semiconductor Manufacturing Equipment Facilities means facilities for the physical production of specialized equipment integral to the manufacturing of semiconductors and subsystems that enable or are incorporated into the manufacturing equipment. Specific examples given by Commerce include deposition equipment such as chemical vapor deposition, physical vapor deposition, and atomic layer deposition; etching equipment (wet etch, dry etch); lithography equipment (steppers, scanners, extreme ultraviolet); wafer slicing equipment, wafer dicing equipment, and wire bonders; inspection and measuring equipment, including scanning electron microscopes, atomic force microscopes, optical inspection systems, and wafer probes; certain metrology and inspection systems; and ion implantation and diffusion/oxidation furnaces.

KEY DATES (AS OF PUBLICATION DATE)

• For leading-edge commercial facilities: Both pre-applications (optional but recommended) and full applications are already being accepted on a rolling basis.
• For current-generation, mature-node, and back-end production facilities: Pre-applications (optional but recommended) are already being accepted on a rolling basis, and Commerce recently began accepting full applications on a rolling basis on June 26, 2023.
• For wafer manufacturing facilities: Pre-applications (optional but recommended) will be accepted on a rolling basis starting September 1, 2023, and full applications will be accepted on a rolling basis starting October 23, 2023.
• For semiconductor materials and manufacturing equipment facilities for which the capital investment equals or exceeds $300 million: Pre-applications (optional but recommended) will be accepted on a rolling basis starting September 1, 2023, and full applications will be accepted on a rolling basis starting October 23, 2023.
• For all potential applicants: The Department continues to accept statements of interest on a rolling basis to further inform the government of potential applicants’ interest and potentially facilitate more efficient application review.

NEXT STEPS

An additional funding opportunity will be released at a later date for supplier projects below the $300 million threshold with a tailored application that smaller businesses can navigate. For commercial R&D facilities, Commerce will subsequently release a separate funding opportunity with details on the application process and timeline. In addition, Commerce has emphasized its plan to prioritize robust international engagement with like-minded partners to strengthen and diversify the global semiconductor supply chain.

Commerce’s CHIPS-related international engagement to date has included engagements with the Republic of Korea, Japan, India, and the United Kingdom, and through the Indo-Pacific Economic Framework, European Union-United States Trade and Technology Council, and North America Leaders’ Summit.

RECOMMENDATIONS AND CONCLUSION

Due to the high level of interest and the limited funding available, applicants should be mindful of the parameters and deadlines established by Commerce. As the funding applications are accepted on a rolling basis, potential applicants interested in receiving CHIPS Program funding should endeavor to prepare the application material as soon as possible. Applicants should make strong, evidence-backed requests for funding that demonstrate, in detail, how the desired project furthers the objectives of the CHIPS and Science Act.

Given that the principal objective of the CHIPS Program, as stated by Commerce, is to advance US economic and national security interests, applicants should emphasize how their projects align with these objectives, along with demonstrating a commitment to long-term investment in the United States.

For instance, applicants are expected to initially assess their current organizational and project cybersecurity practices, demonstrate a feasible plan to ensure the supply chain security and resilience of the proposed project, and proactively address any foreign entity that might exercise control over the applicant or a proposed project or has access to confidential information about the proposed project.

We strongly recommend that in order to be as competitive as possible, given the limited funding available, applicants ensure that their proposals are informed by a deep and nuanced understanding of US industrial policy and of how the US government assesses national security risk posed by foreign adversaries’ efforts to target and exploit companies in the semiconductor space.

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