CHIPS Act funding opportunities and application process

Published: 03/21/2023

Greater Phoenix legal professionals discuss how to apply for the first round of CHIPS Act funding

The CHIPS and Science Act, also known as the CHIPS Act, is poised to provide significant funding to semiconductor companies that operate in or plan to expand to Greater Phoenix. For anyone interested in receiving this funding, it’s important the application process is completed quickly and accurately.

“It's not going to be a one-size-fits-all application, but you should be cognizant of what those requirements are going to be on the back end,” said Snell & Wilmer Partner Brett Johnson.

GPEC hosted a special event webinar with Snell & Wilmer Associate T. Troy Galan, Partner Brett Johnson and Spencer Fane Partner Mike Patterson, moderated by GPEC Vice President of International Business Development Sean Fogarty, on the topics of:

  • Chips Act funding opportunities
  • Qualification requirements
  • Application requirements

CHIPS Act opportunities

The U.S. Department of Commerce (DOC) released application guidelines for the first CHIPS Act funding round, specific to semiconductor production facilities, on February 28, 2023. The opportunity seeks applications for projects to construct, expand, or modernize commercial facilities to produce leading-edge, current-generation, and mature-node semiconductors. This includes both front-end wafer fabrication and back-end packaging.

Eligible entities for CHIPS Act funding

Eligible applicants include:

  • Nonprofits
  • Private-sector entities
  • Consortiums of private sector entities or a consortium nonprofit, public, and private-sector entities

Ineligible entities:

  • Foreign entities of concern
  • Any applications the DOC determines with its broad discretion as processing any national security risks
Eligible projects for CHIPS Act funding
  • Projects must be accomplishing a physical facility change such as:
    • Significantly enlarges an existing facility or creating a new facility
    • Increases capacity of an existing facility via a material capital investment, such as adding a new production line
    • Upgrades an existing facility, such as adding a new node or converting a facility
  •  Facilities must be in the U.S.
  • Applicants must demonstrate the CHIPS Act funding is necessary for the project
  • Applicants must have a documented interest in pursuing the project
Notice of Funding Opportunity (NOFO) eligibility

The first NOFO seeks applications for assistance for projects to construct, expand or modernize commercial semiconductor facilities and is limited to semiconductor manufacturers. The second NOFO is expected to be released in late Spring 2023 for equipment and materials manufacturers. The third is expected in Fall 2023 for construction of semiconductor Research and Development (R&D) facilities.

CHIPS Act application

“My strong suggestion is that you [fill in the application] offline and work through several drafts of it and get it right,” Patterson said. “Even if you’re not in the first group that can submit on the very first date... the government still wants you to send in your Statement of Interest right now. They're trying to gauge interest and find out who’s out there.”

The first steps in the pre-application process is to register in the federal System for Award Management (SAM) because you will be asked about registering with SAM in the application. Next, businesses need to write a Statement of Interest, which is a short description of the project that must be submitted at least 21 days prior to submitting a pre-application or full application. Patterson encourages applicants to complete the optional pre-application form to provide more detailed financial information than what’s contained in the Statement of Interest. The DOC will then provide feedback, which can assist in submitting a successful final application.

The full application and detailed information about the applicant and project, are required for all applicants. Applicants should consider feedback received from their pre-application, Patterson said. If the government wants to move forward with an application, they will produce a Preliminary Memorandum of Terms, followed by due diligence, including an environmental review, and award preparation and issuance.

  • Leading-edge facilities: pre-applications and full applications will be accepted on a rolling basis beginning on Friday, March 31, 2023.
  • Current-generation, mature-node, and back-end production facilities: pre-applications will be accepted on a rolling basis beginning on Monday, May 1, 2023 and full applications will be accepted on a rolling basis beginning on Monday, June 26, 2023.

CHIPS Act qualification requirements

Johnson and Galan explained successful applicants must meet the following criteria:

  • Economic and national security objectives – This will be given primary importance and receives the greatest weight. The DOC wants to know how the technology the facility will be providing is going to help the U.S. Government, the Department of Defense and the U.S. Intelligence Community. It also wants to make sure that it is resilient against threats from foreign entities and supply chain issues.

“If we have another crisis at some point that requires borders to be shut down, that [we] will not be affected by what is going on in countries outside the United States,” Galan said.

  • Commercial viability – The DOC will want to know what specific technology the applicant will be manufacturing in the facility, who the customer base is and if there is a plan in place to ensure economic resilience.
  • Financial strength – The DOC will look for detailed financial metrics, but Galan encourages applicants to submit this in the pre-application stage. Specific details include projected cashflow, economic sustainability, private third-party funding, and support from state and local governments.
  • Technical feasibility and readiness – There are funding for brand new facilities to break ground but some applications with existing infrastructure will be prioritized. For either plan, the U.S. Government wants to see a plan that starts on the day the applicant receives the award to the first date the chips come out of the facility, Galan said.

“Due to the shortage of computer chips, the U.S. Government would like to get these facilities up and running as soon as possible,” Galan said.

  • Workforce development – The U.S. Government will look at the workforce of the facility as well as the construction workforce involved to ensure the facility is modernized. The workforce development plan should include details on ensuring diversity, if it assists underserved communities and allowing labor unions.
  • Broader impacts – CHIPS Act funding received should help develop local communities by investing in local R&D facilities; collaborating with higher education institutions; complying with the National Environmental Policy Act (NEPA); and engaging with businesses that are minority-owned, veteran-owned and women-owned.

“You need to be able to show that you have the local support, and the local support needs to also identify these economic and national security objectives as well as highlight them as part of the greater package,” Johnson said.

Partners in the project include, but are not limited to, contractors supplied for the facility, a legal and finance team, economic development organizations, as well as colleges and universities to ensure a workforce plan is put in place, Galan said.

Eligible CHIPS Act funding uses may include:
  • Site development
  • Workforce development
  • Equipment (including financing)
  • Reasonable operating expenses (expenses that arise from the operation, maintenance or repair of the project)
CHIPS Act funding restrictions:
  • Engaging in significant transactions expanding semiconductor manufacturing in foreign countries of concern
  • Joint research
  • Technology licensing with foreign entities of concern

Johnson and Patterson stressed the importance of applicants beginning the process as soon and as prepared as possible.

“Try to get the process started ASAP, then start the application process and develop relationships with local entities, ensure your supply chain is well established to make sure the application is 100% complete,” Johnson said.

Additional Resources:

Disclaimer: The information provided on the webinar and in this blog do not constitute legal advice. All information from the webinar and blog are for general informational purposes only.