The CHIPS Act - A Checklist to Qualify Potential Applicants

The purpose of the CHIPS Incentives Program is to strengthen U.S. economic and national security and bolster economic resilience and competition. In order to receive funding, applicants must demonstrate how their project will advance these goals.

KEY PROJECT CHARACTERISTICS THE U.S. DEPARTMENT OF COMMERCE WILL LOOK FOR AS THEY SCORE APPLICATIONS INCLUDE:

  • Strengthening the security and resilience of the semiconductor supply chain. 
  • Providing a supply of semiconductors that meet national security usage requirements (such as DOD, critical infrastructure, water, power, transport and key commercial components, banking finance, data privacy and telecom). 
  • Demonstrating how business plans will grow the U.S. economy and support job creation for skilled, technical workers. 
  • Supporting projects that meet government agencies’ need for access to domestically produced chips
  • Protecting physical infrastructure and the supplier ecosystem through risk management strategies to avoid supply chain exploitation and/or the loss of intellectual property. 
  • Mitigating operational and cybersecurity risks, including those posed by insider threats, external influence from foreign entities of concern, dependence on foreign-owned or sourced inputs or equipment and espionage. The Department of Commerce (DOC) has stated it will prioritize projects that support this goal.

MINIMUM REQUIREMENTS FOR PROJECTS AND COMPANIES

COMPANY

  • Applicants must be a covered entity.1
  • Companies should structure the finances of their project(s) to maximize private-sector contributions and minimize the need for government incentives. 
  • Organizations should detail their intentions with respect to stock buybacks over five years, including whether they intend to refrain from or limit them. Information about the existence of current or future intentions for share buybacks, dividend payments, dividend payment increases or special dividends should also be detailed.

PROJECT

  • Projects must be in the United States.
  • Funding must be used for facilities and equipment. 
  • Projects must involve fabrication, assembly, testing, advanced packaging or production of semiconductors. 
  • Applicants must be offered a covered incentive2 from a state or local jurisdiction. 
  • Developers should describe whether and how they plan to use iron, steel and construction materials produced in the U.S. as part of their projects. 
  • Material suppliers and R&D activities will receive support in later funding rounds, in the summer and fall of 2023 respectively.

NEW: UPDATED GUARDRAILS BY THE DEPARTMENT OF COMMERCE 

In September 2023, the DOC updated and finalized the national security guardrails that CHIPS Act funding recipients must abide by. Key requirements include: 

  • Restrictions and limits on using funds to expand semiconductor facilities outside of the U.S. 
  • Permissive uses in ordinary course activities to service certain markets 
  • Limits on engaging in joint research with foreign entities of concern 
  • Claw-backs and recent waivers

DEMONSTRATE WORKER AND COMMUNITY INVESTMENT

  • Companies should detail planned commitments to worker and community investment, including regional workforce education and training. 
  • Applicants should consider sharing how they will allocate investments to to recruit, train, hire, retain and upskill a diverse workforce. 
  • Applicants should be aware of Davis Bacon Requirements, which includes a Project Labor Agreement (PLA) requirement for prevailing wage. All laborers and mechanics employed by the applicant, subrecipients or contractors or subcontractors shall be paid wages at rates not less than those prevailing on similar projects in the locality, as determined by the Secretary of Labor.

COMMITMENTS TO DOC

  • A successful applicant must enter into an agreement specifying that during the 10-year period beginning on the date of the award, it may not engage in any significant transaction involving the material expansion of semiconductor manufacturing capacity any foreign “country of concern” as defined by the U.S. government/DOC/DOD, etc., except under certain limited conditions. Foreign countries of concern include but are not limited to China, North Korea, Russia and Iran. 
  • Applicants should be aware they are bound to upside sharing, if they receive an award. Recipients that receive more than $150 million in CHIPS Direct Funding will be required to share (above an agreed-upon threshold specified in the award).

Unsure whether your project qualifies? Have questions or want to learn more? BDO can help!

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Related Resources

1 “Covered entity” means a nonprofit entity; a private-sector entity; a consortium of private-sector entities; or a consortium of nonprofit, public, and private-sector entities with a demonstrated ability to substantially finance, construct, expand, or modernize a facility relating to fabrication, assembly, testing, advanced packaging or production of semiconductors. 

2 “Covered incentive” is an incentive offered by a governmental entity to (A) a covered entity, for the purposes of constructing within the jurisdiction of the governmental entity, or expanding an existing facility within that jurisdiction, a facility described under “covered entity;” and (B) a workforce-related incentive (including a grant agreement relating to workforce training or vocational education), any concession with respect to real property, funding for research and development with respect to semiconductors and any other incentive determined appropriate. 

Material discussed in this publication is meant to provide general information and should not be acted on without professional advice tailored to your needs.