Understanding the State and Territory Role in Implementing the CHIPS for America Fund

States and territories will assess their competitive advantages, assets, and opportunities, as well as identify what they still need to develop with regard to their regional ecosystems.

The nation’s Governors were pleased to see the bipartisan Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022 signed into law by President Biden on August 9, 2022. The law provides a total of $280 billion in federal funding to encourage the construction of semiconductor facilities in the United States, boost science and technology research, address anti-competitive trade practices and promote STEM education and workforce training. Among other provisions, the new law will offer subsidies to manufacturers and suppliers who are based in the U.S. and will increase funding for research and development (R&D) that leads to advanced chip design.

The U.S. Department of Commerce (Commerce) has a key role in implementing several aspects of the CHIPS Act. It is responsible for overseeing the $50 billion CHIPS for America Fund which comprises a five-year $39 billion semiconductor manufacturing incentives program and an $11 billion fund to support advanced semiconductor R&D and workforce measures. Importantly for states and territories, companies competing for these financial incentives will be required to show they have collaborated with a state to come up with a plan for their industrial facilities, workforce, and related research. Given that requirement, there are important expectations regarding the up-front roles of those states interested in benefitting from the anticipated long-term economic impacts and expansion. State engagement can result in greater geographic diversity and produce opportunities for regional innovation and resulting community spillover.

The CHIPS for America Fund was fully funded by Congress, and Commerce has been working to implement the program since its passage. To-date, the Department has released a Strategy for the CHIPS for America Fund, established the CHIPS.gov webpage and issued a number of requests for information on forthcoming programs. Notices of Funding Opportunities (NOFOs) from Commerce are expected as early as February 2023. Governors hoping to attract new semiconductor projects and clusters to their states will need to confer with the manufacturers and suppliers to work out – in advance of proposal submission – any state support for the companies and surrounding ecosystem in the way of economic and workforce development incentives. For example, long-term workforce pipeline development will benefit from the strategic engagement of the state’s federally-funded workforce development system in developing regional sector partnerships, and may necessitate agreements with universities, community colleges, and other institutions for training and education.

As noted, Commerce funding awards will go through the manufacturing and supply chain organizations. However, the funding is expected to cover a spectrum of ecosystem partners including, for example, subcontracting with socially and economically disadvantaged (SEDI) businesses. States and territories might also provide:

  • site development, property concessions, utilities (upgraded power grids, gas lines, water treatment facilities), and infrastructure contributions along with expedited permitting;
  • tax credits to complement the federal tax credits that are available through the law;
  • new training by minority serving institutions, community colleges, unions and others;
  • ancillary workforce housing and community development initiatives;
  • wraparound services and targeted inclusive outreach (child care, transportation, language supports, internet, mentoring and career counseling); and
  • perhaps pilot projects to assist with regional connections and urban-rural links.

Any agreements that are crafted between states and manufacturers, educational institutions, and adjacent jurisdictions or states will specify what and how much of the above options and initiatives are covered by federal, state and local levels. States and territories will assess their competitive advantages, assets, and opportunities, as well as identify what they still need to develop with regard to their regional ecosystems. Armed with this knowledge, states can bring to the table the necessary stakeholders to confer on CHIPS project development. Commerce has noted some proposals will be simple and smaller, such as upgrading equipment or expanding existing facilities, while other proposals will be more complex and take longer to evaluate, negotiate and award funds.

What will help speed up the process? It may be helpful for each state or territory to have a representative in the Governor’s office or state economic development organization who can collaborate with corporate liaisons for the purpose of implementing incentives or actions to get projects off the ground quickly. These liaisons could also help reduce risk, assist with site selection, identify suppliers, and ensure compliance with local laws. Once the NOFOs are announced, Commerce will be considering incentive project proposals on a rolling basis.

Based on another provision in the CHIPS and Science Act – the Tech Hubs program – funding was appropriated in December to get started on this new place-based program. Some $500,000 will soon be available directly to states through the U.S. Economic Development Administration, which sits within Commerce, for the purpose of organizing related support clusters in particularly disadvantaged regions based on economic data.

To support Governors as they implement the CHIPS and Science Act, NGA has recently released a CHIPS and Science Act resources page. This will be routinely updated to serve as a “one-stop-shop” for Governors and their advisors on the Act. The page includes the latest announcements, federal resources, NGA resources and state highlights, and other information to support states in leveraging and implementing this historic investment.

For more information, please contact our Workforce Development and Economic Policy team at: workforcedevelopment@nga.org