The U.S. House of Representatives has introduced new legislation that would establish an investment tax credit to incentivize semiconductor manufacturing, design and research in America.
Called the Facilitating American Built Semiconductors (FABS) Act, the bipartisan legislation would provide a 25% refundable investment tax credit (RITC) to semiconductor companies for investments in manufacturing of the technology in the U.S.
This tax credit could help cover the building costs for a semiconductor manufacturing facility or for semiconductor equipment that is used to produce chips.
Additionally, the bill would provide a 25% RITC for companies investing in the research and design of next generation semiconductors.
"This is a matter of national security,” said Mike Kelly, a U.S. representative from Pennsylvania. “Building semiconductor chips here in America strengthens the U.S. supply chain, lessens our reliance on foreign products and creates more jobs here at home. The auto industry—heavily reliant on semiconductor chips—has been the heart and soul of America for over a century. This pro-growth legislation is a win-win and will help to ensure that can continue for the next century to come."
The Semiconductor Industry Association (SIA) called the FABS Act an important complement to the manufacturing incentives and research investments already in place in the country, in addition to the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.
“Semiconductors form the nerve center of America’s economy and national security, and incentivizing domestic chip research, design and manufacturing is a national priority,” said John Neuffer, president and CEO of the SIA. “The FABS Act introduced today would incentivize semiconductor companies to manufacture and design more of the chips our country needs on U.S. shores, spurring private investments and creating American jobs.”
Coupled with the CHIPS Act, the FABS Act would help produce robust, predictable and durable incentives to restore U.S. semiconductor leadership, Neuffer said.
The FABS Act is different from the CHIPS for America Act, which was just passed from by the U.S. House of Representatives in February after already passing the Senate last year.
The CHIPS Act has been a priority for the Biden Administration which has called on Congress to pass the act numerous times. While both houses have passed the bill, it still must be revised, and negotiations will likely take time.
If passed as it stands now, the CHIPS Act would provide $52 billion in federal investments for domestic semiconductor research, design and manufacturing provisions. Additionally, it includes $45 billion to strengthen supply chains for high tech products.
Why incentives matter
According to the SIA, the share of modern semiconductor manufacturing capacity in the U.S. has fallen from 37% in 1990 to only 12% today. If no investments are made, this is likely to fall even further over the next decade, SIA said.
This decline is attributed to substantial manufacturing incentives offered by foreign governments of Taiwan, Korea and China.
This has led to a competitive disadvantage in attracting new construction or fabs in the U.S. Federal investment into semiconductor research has been flat as a share of gross final product for many decades.
The SIA said expanding the global semiconductor manufacturing supply chain has seen significant vulnerabilities because of geopolitical issues and the COVID-19 pandemic. Through government investments in chip manufacturing and research this can be addressed to encourage a less aggregated approach to chip manufacturing.
Fabs being built
New fab projects are already underway in the U.S. as companies begin to push forward with plans to expand manufacturing with or without incentives. Obviously, incentives will help encourage more fab construction but companies such as Intel are pushing forward regardless.