CHIPS - Facilities for Semiconductor Materials and Manufacturing Equipment NOFO.pdf

CHIPS Incentives Program – Facilities for Semiconductor Materials and Manufacturing Equipment

Notice of Funding Opportunity

NOTICE OF FUNDING OPPORTUNITY (NOFO)

CHIPS Incentives Program – Facilities for Semiconductor Materials and Manufacturing Equipment

EXECUTIVE SUMMARY

• Federal Agency Name: National Institute of Standards and Technology (NIST), United States Department of Commerce

• Funding Opportunity Title: CHIPS Incentives Program – Facilities for Semiconductor Materials and Manufacturing Equipment

• Announcement Type: Initial

• Funding Opportunity Number: 2023-NIST-CHIPS-SMME-01

• Assistance Listing (CFDA Number): 11.037 – CHIPS Incentives Program

• Dates:

o For all potential applicants, concept plans will be accepted between December 1, 2023, and February 1, 2024.

o For applications that are invited to advance to the full application phase, the

CHIPS Program Office will communicate full application submission dates to applicants individually upon notifying them of their advancement.

The Department of Commerce may amend this NOFO at any time. It may also close the funding opportunity with at least 60 days’ notice. Changes will be communicated via https://www.grants.gov and https://www.chips.gov.

• Application Submission Address: https://applications.chips.gov/

Funding Opportunity Description: The CHIPS Incentives Program aims to catalyze long-term economically sustainable growth in the domestic semiconductor industry in support of U.S.

economic and national security. This is the second Notice of Funding Opportunity under this program. It seeks applications for projects for the construction, expansion, or modernization of commercial facilities for semiconductor materials and manufacturing equipment for which the capital investment falls below $300 million.

https://www.grants.gov/ https://www.chips.gov/ https://applications.chips.gov/

Table of Contents I. Program Description

A. Program Objectives

B. Program Summary

C. Program Priorities

II. Federal Award Information

A. Funding Instrument

B. Funding Availability

C. Award Amount

D. Period of Performance

III. Eligibility Information

A. Eligible Applicants

IV. Application and Submission Information

A. How to Access an Application Package

B. Submission Dates and Times

C. Confidential Information

D. False Statements

E. Application Requirements

F. Requirements for Attachments Submitted through the CHIPS Incentives Program Application Portal

G. Content and Form of Concept Plan

H. Content and Form of Full Application Submission

I. Funding Restrictions

J. Prohibition on Profit and Fees

V. Application Review Information

A. Concept Plan Evaluation Criteria

B. Selection Factors

C. Full Application Evaluation Criteria

D. Review and Selection Process

E. Responsibility / Qualification Records on SAM.gov

F. Additional Information

VI. Federal Award Administration Information

A. Federal Awarding Agency Contacts

VII. Appendix

A. Definitions

FULL ANNOUNCEMENT TEXT

I. Program Description

This Notice of Funding Opportunity (NOFO) seeks applications for the CHIPS Incentives Program, authorized by Title XCIX—Creating Helpful Incentives to Produce Semiconductors for America of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283, referred to as the CHIPS Act or Act), as amended by the CHIPS Act of 2022 (Division A of Pub. L. 117-167). The CHIPS Incentives Program is administered by the CHIPS Program Office (CPO) within the National Institute of Standards and Technology (NIST) of the United States Department of Commerce (Department).

This NOFO seeks applications for CHIPS Incentives Awards that will support investments in the construction, expansion, or modernization of commercial facilities in the United States for semiconductor materials and semiconductor manufacturing equipment for which the capital investment falls below $300 million. The application process and requirements detailed below are designed to be appropriate for smaller projects and accessible to smaller businesses. Awards made pursuant to this NOFO will be in the form of direct funding (via grants, cooperative agreements, or other transactions).1

CPO will provide further guidance on the program requirements and procedures in subsequent publications and through a series of public webinars, information about which will be available at https://www.chips.gov. Interested parties should routinely check https://www.chips.gov for updates.

A. Program Objectives

The CHIPS Incentives Program aims to strengthen U.S. economic and national security, including economic resilience and competitiveness. The CHIPS Act sets forth multiple dimensions of this overriding objective:

• Strengthening the security and resilience of the semiconductor supply chain, including by mitigating gaps and vulnerabilities

• Providing a supply of secure semiconductors relevant for national security

• Strengthening the leadership of the United States in semiconductor technology

• Growing the economy of the United States and supporting job creation in the United

States

• Bolstering the semiconductor and skilled technical workforces in the United States

• Promoting the inclusion of economically disadvantaged individuals2 and small businesses

1 Although this NOFO offers only direct funding, applicants will be asked as part of the application package whether they would be interested in a loan or loan guarantee should such options become available at a later date.

2 See Appendix for the definition of “economically disadvantaged individuals.”

• Improving the resilience of the semiconductor supply chains of critical manufacturing industries3

For the CHIPS Incentives Program to be successful on these many dimensions, it must lay the groundwork for long-term growth and economic sustainability in the domestic semiconductor industry and promote the secure and resilient supply chains on which the sector relies. The industry must have a robust and skilled workforce and a diverse base of suppliers for semiconductor production. It must support research and development (R&D) that will drive innovation in design, materials, and processes that will accelerate the industries of the future.

And it must support the broader U.S. economy, creating good jobs accessible to all and supporting and growing local economies and communities.

In addition, for the CHIPS Incentives Program to succeed, the Federal funds must serve as a catalyst to galvanize private, state, and local investment in the semiconductor industry. That is, the program funds are a supplement to, not a replacement for, other sources of capital.

The CHIPS Incentives Program seeks to fund applicants that demonstrate a commitment to investment in the United States for the long term and projects that maximize private sources of capital. Only private industry can marshal the resources necessary to make the sustaining investments needed in the decades that follow to maintain a resilient, economically viable, and growing U.S. semiconductor industry.

B. Program Summary

The CHIPS Incentives Program must fund a variety of projects to achieve its economic and national security objectives. Projects will vary in technology, scale, cost, location, risk, workforce needs, and other factors. To fund any project, the Department must determine that the project is in the economic and national security interests of the United States and satisfies the CHIPS Act’s eligibility requirements, as well as the amount of funding appropriate for the project.4

This NOFO describes considerations and procedures the Department will use to make these determinations. Because this funding opportunity is targeted towards smaller projects, the Department is operating a streamlined application process designed to facilitate participation for small and medium-sized businesses. This section summarizes, in a question-and-answer format, certain eligibility and procedural requirements for applications under this NOFO.

1. What projects are eligible for funding under this NOFO?

This NOFO seeks applications for the construction, expansion, or modernization of commercial facilities in the United States in the following categories.

3 See 15 U.S.C.§ 4652(d). See Appendix for the definition of “critical manufacturing industries.”

4 See 15 U.S.C. §§ 4652(a)(2)(C)(i)(I)-(II), 4652(a)(3)(A).

Semiconductor Materials 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 include but are not limited to polysilicon; photoresists and ancillaries (developers, strippers, litho solvents, and anti-reflective and hardmask layers); sputtering targets (including tantalum, titanium, and aluminum); and materials specifically used in quantum information systems (such as hafnium and niobium).5 Applications for the construction, expansion, or modernization of these facilities will be eligible for this NOFO only if the capital investment, as defined in Section IV.G.3, falls below $300 million.

Semiconductor Manufacturing Equipment 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 of semiconductor manufacturing equipment include but are not limited to deposition equipment, including 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. Applications for the construction, expansion, or modernization of these facilities will be eligible for this NOFO only if the capital investment, as defined in Section IV.G.3, falls below $300 million.

Only facilities of the types listed above are eligible for funding under this NOFO. Commercial fabrication facilities, as well as facilities for semiconductor materials and manufacturing equipment for which the capital investment equals or exceeds $300 million, may apply for funding under the NOFO the Department released in February and amended in June.6 CPO expects to launch an additional funding process for applications related to R&D facilities at a later date.

Note that the Department will not fund applications that lack sufficient scale to meaningfully contribute to the objectives outlined in this NOFO. The Department expects that projects with capital investments below $20 million are unlikely to meet this standard. If a sub-$20 million project does meet this standard, the Department generally expects other stakeholders—including chipmakers, larger suppliers, and state and local entities—to make the project viable without CHIPS funding.

2. What are the eligibility requirements for funding under this NOFO?

The CHIPS Act imposes several eligibility requirements for funding.

5 For the purposes of this NOFO, wafer manufacturing facilities are not considered semiconductor materials facilities. Wafer manufacturing facilities are eligible to apply for funding under the CHIPS Incentives Program – Commercial Fabrication Facilities Notice of Funding Opportunity.

6 See CHIPS Incentives Program – Commercial Fabrication Facilities Notice of Funding Opportunity.

https://www.nist.gov/system/files/documents/2023/06/23/CHIPS-Commercial%20Fabrication%20Facilities%20NOFO%20Amendment%201.pdf https://www.nist.gov/system/files/documents/2023/06/23/CHIPS-Commercial%20Fabrication%20Facilities%20NOFO%20Amendment%201.pdf https://www.nist.gov/system/files/documents/2023/06/23/CHIPS-Commercial%20Fabrication%20Facilities%20NOFO%20Amendment%201.pdf

First, funding is available only to “covered entities.”7 This term includes private entities or consortia of private and public entities with a demonstrated ability to substantially finance, construct, expand, or modernize a facility relating to fabrication, assembly, testing, advanced packaging, production, or research and development of semiconductors, materials used to manufacture semiconductors, or semiconductor manufacturing equipment.8 Section III.A describes this requirement in more detail.

Second, funding is available to covered entities “to incentivize investment in facilities and equipment in the United States” for the production of materials used to manufacture semiconductors or semiconductor manufacturing equipment.9 An applicant must demonstrate how the CHIPS Incentives requested will incentivize the applicant to make investments in facilities and equipment in the United States that would not occur in the absence of the CHIPS Incentives.

Third, funding must be for the construction, expansion, or modernization of facilities of the kind described in Section I.B.1.10 For the purposes of this NOFO, construction means the construction of a new facility. Expansion or modernization includes, for example, significantly enlarging an existing facility, increasing the capacity of an existing facility via a material capital investment, such as by adding a new production line, and upgrading an existing facility, such as converting a facility from another use. Both expansions and modernizations will be evaluated on the materiality of the investment relative to existing production. Projects that involve relocating a material amount of equipment, facilities, or production from one facility in the United States to another facility, new or expanded, are disfavored. Such projects will be deemed nonresponsive to this NOFO absent a compelling economic or national security justification.11

Fourth, the CHIPS Act specifies that the covered entity must have a documented interest in constructing, expanding, or modernizing an eligible facility.12 With respect to such construction, expansion, or modernization, the CHIPS Act requires that the covered entity shall:

• Have been offered a covered incentive from a state or local jurisdiction (state or local incentive) where the project is located, for the purposes of attracting the construction, expansion, or modernization of the facility13

• Make commitments to worker and community investment, including through training and education benefits paid by the covered entity and programs to expand employment opportunities for economically disadvantaged individuals14

7 See 15 U.S.C. § 4652(a)(1).

8 See 15 U.S.C. § 4651(2).

9 See 15 U.S.C. § 4652(a)(1).

10 See 15 U.S.C. § 4652(a)(4)(A).

11 15 U.S.C. § 4652(a)(2)(C)(iv).

12 15 U.S.C. § 4652(a)(2)(B)(i).

13 15 U.S.C. § 4652(a)(2)(B)(ii)(I); 15 U.S.C. § 4651(3)(A).

14 15 U.S.C. § 4652(a)(2)(B)(ii)(II)(aa)-(bb).

• Secure commitments from regional educational and training entities and institutions of higher education to provide workforce training, including programming for training and job placement of economically disadvantaged individuals15

• Have an “executable plan,” i.e., a plan reasonably capable of successful implementation, to sustain the facility without additional funding from the CHIPS Incentives Program16

• Have documented its workforce needs and produced a strategy to meet such workforce needs as well as the aforementioned commitments to worker and community investment17

• Have determined the types of semiconductor technology it will produce at the proposed facility, and the customers, or categories of customers, to whom the items will be sold,18 and

• Have developed an “executable plan” to identify and mitigate relevant semiconductor supply chain security risks.19

The Department has designed this NOFO, including the application requirements and review process, to ensure that these statutory requirements will be met for projects receiving CHIPS Incentives.

3. What constitutes a project for purposes of an application?

For the purposes of an application, a “project” is a set of capital expenditures for the construction, expansion, or modernization of a single facility. A project also includes any related workforce development or operating expense costs for the facility that the applicant proposes to cover with CHIPS Incentives funds. Applicants may only include one project per application.

4. May applicants apply for funding under this NOFO as part of a consortium, and if so, how?

Yes, applicants may apply for funding under this NOFO as part of a consortium. For projects that claim to support vibrant U.S. clusters20, in particular—see discussion of the Department’s economic security objectives in Section I.C.1—the Department strongly encourages applicants to

15 15 U.S.C. § 4652(a)(2)(B)(ii)(III).

16 15 U.S.C. § 4652(a)(2)(B)(ii)(IV).

17 15 U.S.C. § 4652(a)(2)(B)(ii)(VI).

18 15 U.S.C. § 4652(a)(2)(B)(ii)(V).

19 15 U.S.C. § 4652(a)(2)(B)(iii).

20 The Department has defined a cluster for these purposes as “a geographically compact area with multiple commercial-scale fabs owned and operated by one or more companies; a large, diverse, and skilled workforce;

nearby suppliers to the semiconductor industry; R&D facilities; utilities; and specialized infrastructure, such as chemical processing and water treatment facilities.” Department of Commerce, “Vision for Success: Commercial Fabrication Facilities,” February 28, 2023. The proximity and density of firms within a specific geography, and their linked industries, generate incentives for knowledge sharing, development of best practices, innovation, investment, and workforce development. They are often supported by government and other institutions including universities, standards-setting bodies, and vocational training institutions. The development of self-sustaining clusters is critical to developing the U.S. chips innovation ecosystem and can be furthered in various ways, including but not limited to the co-location of firms, the production of inputs within a supply chain, the upskilling of local workforces, and the establishment of collaborations between public and private institutions that facilitate tech commercialization.

https://www.nist.gov/system/files/documents/2023/02/28/Vision_for_Success-Commercial_Fabrication_Facilities.pdf https://www.nist.gov/system/files/documents/2023/02/28/Vision_for_Success-Commercial_Fabrication_Facilities.pdf consider applying as part of a consortium to leverage connections with other entities seeking to build and sustain regional semiconductor clusters. The Department will award funding on a per-project basis to consortium members proposing to construct, expand, or modernize a facility eligible under this NOFO.

Since applicants may include only one project per application, a consortium seeking funding for multiple projects must submit a separate application for each project. The Department expects the entity submitting the application to be the for-profit entity within the consortium that will own and/or operate the project facility. These applicants must also submit a consortium narrative detailing the other members of the consortium and the overall strategic vision of the consortium, among other relevant information.

The Department expects that strong consortia will include at least two suppliers, a state or local government entity (which may include quasi-governmental entities), and an anchor institution such as a semiconductor fab.21 Other members may include workforce training providers, labor unions, economic development corporations, institutions of higher education, philanthropic foundations, industry organizations, Tech Hubs,22 or other relevant entities.23

State or local government entities that join consortia are strongly encouraged to take steps to build and support vibrant semiconductor clusters. Such steps might include investments in workforce, education, site preparation, research and development, or infrastructure (including transportation, housing, water, or energy) designed to benefit both the consortia members and the broader community. State and local government entities in consortia are also strongly encouraged to help streamline access to resources critical to cluster growth, such as permitting and expansion services, and coordination with relevant regulatory authorities.

Under this NOFO, consortia do not need to have an umbrella organization or other formal legal structure. Consortium members must, however, actively collaborate and align on the content of each application submitted as part of the consortium. In evaluating projects submitted as part of a consortium, the Department will consider the extent to which the consortium’s strategic vision advances economic and national security, and the extent to which a given project is necessary for achieving that vision. Thus, the Department strongly encourages consortia to be selective in choosing projects.

21 Semiconductor fabs will not receive funding under this NOFO for the construction, expansion, or modernization of the fab. Those semiconductor fabs that wish to apply for a CHIPS Incentive Award for such activities may do so under the CHIPS Incentives Program – Commercial Fabrication Facilities Notice of Funding Opportunity.

22 The Economic Development Agency (EDA) defines a Tech Hub’s geography as an area with a concentration of assets, capital, R&D, labor market, and infrastructure strongly relevant to the Hub’s selected core technology area, the Hub’s identified market opportunity, and its potential to become globally competitive in that area within a decade. See Tech Hubs Notice of Funding Opportunity.

23 Organizations that do not qualify as covered entities may participate in consortia and receive funding as subrecipients or contractors to an eligible covered entity.

https://www.nist.gov/chips/notice-funding-opportunity-commercial-fabrication-facilities https://www.eda.gov/sites/default/files/2023-05/Tech_Hubs_NOFO.pdf

5. Are there any benefits to applying as part of a consortium?

Whether a project meaningfully contributes to the development or sustainability of a cluster is a factor the Department may use to advance concept plans to the full application phase or to select a full application to receive an award. We generally expect applicants applying as part of consortia to be better positioned to make this showing.

In addition, applicants applying as part of a consortium may work together to satisfy various statutory eligibility and other requirements

Covered incentive: The CHIPS Act requires that a covered entity shall have been offered a covered incentive from a state or local jurisdiction (state or local incentive) where the project is located, for the purposes of attracting the construction, expansion, or modernization of the facility.24 For consortium members, this requirement may be satisfied by one letter that offers an incentive to all eligible facilities in the consortium being proposed for construction, expansion, or modernization. Note, however, that the Department will also accept multiple letters.

Worker and community investment: The CHIPS Act requires that a covered entity shall make commitments to worker and community investment, including through training and education benefits paid by the covered entity and programs to expand employment opportunities for economically disadvantaged individuals.25

• Commitments to worker investment: In general, consortium members may collaborate on their workforce investments to achieve economies of scale. Consortium members may also decide among themselves how much funding and/or other resources each contributes to the consortium’s overall commitments. However, within a consortium, each individual applicant must: (1) specify their financial contribution to training and education benefits and (2) list their specific contributions (funding and/or other resources) to programs to expand employment opportunities for economically disadvantaged individuals.

• Commitments to community investment: Consortium members may collaborate on community investments, with consortium members deciding among themselves how much funding and/or other resources each contributes to the consortium’s overall commitments. Individual consortium members applying for funding for eligible facilities must list their specific contribution in their application package.

Commitments to provide workforce training: The CHIPS Act requires that a covered entity shall secure commitments from regional educational and training entities and institutions of higher education to provide workforce training, including programming for training and job placement of economically disadvantaged individuals.26 Consortium members may work together to secure

24 15 U.S.C. § 4652(a)(2)(B)(ii)(I); 15 U.S.C. § 4651(3)(A).

25 15 U.S.C. § 4652(a)(2)(B)(ii)(II)(aa)-(bb).

26 15 U.S.C. § 4652(a)(2)(B)(ii)(III).

these required commitments. The evidence of the commitments should confirm that any individual consortium member applying for funding has secured the commitment.

Workforce strategy: The CHIPS Act requires that a covered entity shall have documented its workforce needs and produced a strategy to meet such workforce needs as well as the commitments to worker and community investment above.27 Consortia applicants may develop one workforce strategy at the consortium level that covers the strategy for each consortium member seeking CHIPS funding for a project to construct, expand, or modernize a facility eligible under this NOFO.

6. How can CHIPS Incentives funds be used?

Funds made available under the CHIPS Incentives Program may be spent only on eligible uses, which include the costs to:

• finance the construction, expansion, or modernization of a facility, or equipment for that facility

• support site development and modernization for a facility

• support workforce development for a facility

• pay reasonable operating expenses for a facility, as determined by the Department.28

Not all of the applicant’s activities within a project may be eligible to receive program funds.

However, as described in Sections IV.G.3 and IV.H.4, the applicant must clearly describe any activities within its proposed project that may be eligible uses for CHIPS Incentives.

Certain purposes are ineligible uses for CHIPS Incentives. See Section IV.I for more details.

7. How much support can a project receive in CHIPS Direct Funding?

It is generally expected that most CHIPS Direct Funding awards will equal 10 percent of project capital expenditures.29 In rare cases, applicants may receive an award of either 20 percent or 30 percent of project capital expenditures if they have (a) made a particularly compelling case that their project advances the Department’s economic and national security objectives, and (b) demonstrated that the additional funding is necessary to make the project commercially viable.

Projects eligible for the Advanced Manufacturing Investment Credit30 (Investment Tax Credit) will not receive an award of more than 20 percent of project capital expenditures.

27 15 U.S.C. § 4652(a)(2)(B)(ii)(VI).

28 See 15 U.S.C. § 4652(a)(4).

29 Project capital expenditures refers to expenses incurred in the construction or improvement of physical assets, such as the costs of land, building and construction, equipment and installation, physical improvements, and working capital during the construction phase.

30 See 26 U.S.C. § 48D. This separate incentive is administered by the Internal Revenue Service and provides a tax credit for qualifying capital investments in a manufacturing facility for which the primary purpose is the manufacture of semiconductors or semiconductor manufacturing equipment, subject to certain credit recapture rules.

The Department expects applicants to take advantage of the Investment Tax Credit, if eligible, to the fullest extent possible.

If an applicant requests more than 10 percent in CHIPS Direct Funding, the Department expects that it may take substantially longer to evaluate the full application and prepare an award.

In addition, if an applicant requests an award of more than 10 percent of project capital expenditures, the Department may offer an award for 10 percent of project capital expenditures contingent on the applicant demonstrating that the project will be able to close the funding gap and be commercially viable at that award amount.

8. How does the application process work?

The application process includes two primary phases. In the first phase, applicants will be asked to submit a concept plan describing how their proposed project addresses core program priorities.

The Department will then invite the most promising applicants to the second phase, where they will have the opportunity to submit a full application. The Department will communicate full application submission dates to those applicants selected to advance, and may work with applicants selected to advance as they shape their concept paper into a full application.

Applicants that advance in the process will be subject to due diligence prior to award. For more information on the application process, see Section V.D.

If an applicant is applying as part of a consortium: Each member of a consortium that seeks CHIPS Incentives for a project to construct, expand, or modernize a facility eligible for funding under this NOFO must submit a separate concept plan and, if invited to the second phase, a separate full application. Each project will be evaluated on its own merits. Consortium applicants will be required to provide details about their consortium in a separate consortium narrative. In evaluating an individual project proposed as part of a consortium, the Department will consider the strength of the consortium’s overall strategic vision and the extent to which an individual project is necessary to advance that vision. For more information, see Sections V.C. and V.D.

C. Program Priorities

The CHIPS Incentives Program seeks to further priorities relating to economic and national security, workforce, and other matters. This section provides information about the program’s priorities. Applicants should develop their applications with these priorities in mind, as they relate to various requirements and evaluative criteria that will form the basis for the Department’s application review process. Applications that do not meet program priorities will not receive funding. The Department will not fund applications that lack sufficient scale to meaningfully contribute to the objectives outlined in this NOFO. The Department expects projects with capital investments below $20 million are unlikely to meet this standard. If a sub- $20 million project does meet this standard, the Department generally expects other stakeholders—including chipmakers, larger suppliers, and state and local entities— make the project viable without CHIPS funding.

1. Economic and National Security Objectives Advancing U.S. economic and national security is the principal objective of the CHIPS Incentives Program. With respect to economic security, this NOFO contains a particular focus on incentivizing the development of vibrant, sustainable semiconductor clusters. These clusters are critical to creating a robust semiconductor ecosystem in the United States.

In addition, the Department seeks to invest in operationally secure projects employing appropriate cybersecurity practices, as well as implementing plans to promote supply chain security and risk management. Projects must be protected from internal and external risks ranging from insider threats to disaster recovery and ensure their supply chain is resilient to disruption. Moreover, projects should generally be capable of continued operations for a period of time without access to non-U.S. facilities and personnel.

a. Economic Security Objectives

The Department has laid out three objectives for its investments in semiconductor materials and manufacturing equipment facilities: (1) strengthening supply chain resilience, (2) advancing U.S.

technology leadership in semiconductor materials and manufacturing equipment, and (3) supporting vibrant U.S. fab clusters. For more detailed information, see “Vision for Success:

Semiconductor Materials and Manufacturing Equipment Facilities.”

Through this NOFO, the Department is particularly focused on the third goal: supporting vibrant U.S. fab clusters. The Department seeks applications for semiconductor material and equipment facilities that advance clusters by closing critical gaps in the U.S. supplier landscape, for example by reducing the burdens associated with transporting critical supply chain inputs.

Applicants claiming to benefit U.S. clusters are strongly encouraged to apply as part of a consortium and to work closely with state and local entities and other stakeholders. Applicants claiming to support one of the other two objectives are also welcome to apply as part of a consortium.

With respect to strengthening supply chain resilience, the Department seeks projects that address chokepoint risks flowing from geographic concentration and reduce the risks of production disruptions due to chronic shortages of critical supply chain inputs.

With respect to advancing U.S. technology leadership, the Department seeks projects that advance U.S. technology leadership by reinforcing existing supply chain strengths and/or developing new and innovative capabilities in the United States. The Department encourages major U.S. semiconductor manufacturing equipment and materials suppliers to increase their footprints in the United States, and aims to attract non-U.S. suppliers of the world’s most advanced semiconductor manufacturing equipment, materials, and subsystems to establish large-scale footprints in the United States.

Ultimately, the Department recognizes that all three objectives are self-reinforcing: supporting vibrant U.S. fab clusters, for example, can generate efficiencies and innovation that end up strengthening supply chain resilience and/or technology leadership. The Department welcomes projects that support one or more of these objectives. If a project does not support a cluster, the application must make a compelling case for advancing one of the Department’s other two objectives to receive funding.

https://www.nist.gov/system/files/documents/2023/06/23/Vision%20for%20Success-Facilities%20for%20Semiconductor%20Materials%20and%20Mfr%20Equipment.pdf https://www.nist.gov/system/files/documents/2023/06/23/Vision%20for%20Success-Facilities%20for%20Semiconductor%20Materials%20and%20Mfr%20Equipment.pdf

Regardless of which objective(s) a project advances, the Department seeks applicants that are committed to strengthening the United States’ robust innovation ecosystem for research and development, including by investing in domestic R&D facilities and participating in R&D initiatives established by the CHIPS Act. CHIPS Act R&D initiatives include the National Semiconductor Technology Center (NSTC), which will conduct research and prototyping of advanced semiconductor technology, and the National Advanced Packaging Manufacturing Program (NAPMP), which will strengthen semiconductor advanced test, assembly, and packaging capability in the domestic ecosystem; Manufacturing USA institute(s) focused on advanced manufacturing areas; and the CHIPS Metrology program, focused on advancing measurement methods to enhance semiconductor manufacturing. Robust industry participation in CHIPS R&D programs will be essential for their success.

Strong applications will include commitments to participate in the NSTC and, if applicable, engage, support, and collaborate with NAPMP-funded projects in an appropriate manner. The Department expects that the substance of applicant commitments to R&D will vary but may include: (1) rotating project technical staff to the NSTC, or training NSTC and NAPMP-funded facility technical staff through exchanges, (2) providing access to existing R&D facilities to NSTC research programs, or (3) providing the NSTC or other CHIPS R&D-funded programs with donations of or access to equipment and/or design tools. Commitments to R&D may also include participation in the Department of Defense Microelectronics Commons.

b. National Security Objectives

As foundational components to U.S. defense and critical infrastructure systems, semiconductors are vital to U.S. national security. The government organizations and contractors that fulfill national security missions require stable, long-term onshore access to semiconductors, which in turn requires a robust, secure domestic semiconductor supply chain. As relevant, CPO encourages applicants to identify the national security programs and platforms the project supports, any customers in the defense industrial base, and any government points-of-contact who can validate that the project will advance national security.

The Department also acknowledges that the risk of malicious disruptions to semiconductors and their supply chains has risen in concert with increased chip complexity, process separation, and outsourcing.31 The evolving threat landscape, coupled with today’s digitized world, provides a large attack surface for adversaries to steal, compromise, alter, or destroy sensitive information that is critical to economic and national security.32 The Department seeks applicants that have made themselves resilient to these attacks, such as by establishing a strategy to protect intellectual property and by assuring the security of their product quality and supply chain to prevent tampering, counterfeiting, and other security issues. The Department will also evaluate projects based on their ability to mitigate additional operational and cyber security risks, 31 See The White House, Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth (2021).

32 See Department of Commerce and Department of Homeland Security, Assessment of the Critical Supply Chains Supporting the U.S. Information and Communications Technology Industry (2022).

https://www.nist.gov/system/files/documents/2023/04/27/A%20Vision%20and%20Strategy%20for%20the%20NSTC.pdf https://www.nist.gov/system/files/documents/2023/04/27/A%20Vision%20and%20Strategy%20for%20the%20NSTC.pdf https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf https://www.dhs.gov/publication/assessment-critical-supply-chains-supporting-us-ict-industry https://www.dhs.gov/publication/assessment-critical-supply-chains-supporting-us-ict-industry including those posed by insider threats, external influence from foreign entities of concern, dependence on foreign-owned or sourced inputs or equipment, and espionage.

Supply chain security is critical to ensure safe and continued production of semiconductors. The Department seeks projects with demonstrated resilience measures through the protection of physical infrastructure and the supplier ecosystem, and risk management strategies—such as regular supply chain mapping—to avoid supply chain exploitation or the theft of intellectual property.

The Department will also consider the national security risks of the location of any upstream or downstream steps in the semiconductor material or equipment manufacturing process.

2. Commercial Viability Long-term commercial viability is an essential component of any successful application.

Commercially viable projects will be grounded on a sound business case providing reliable cash flows that are sufficient to maintain continuity of operations and continued investment in the facility.

Each applicant must describe the type of semiconductor material or equipment the proposed project will produce, where in the semiconductor manufacturing process the technology is used, and key semiconductor- and non-semiconductor-related end markets.33 A strong application will present a sophisticated understanding, backed by evidence, of the demand for a project’s output and other sources of existing and potential future supply. Each applicant must also identify the customers, or categories of customers, for a project’s output, and strong applications will include evidence of offtake commitments or other evidence of specific customer demand.34 The Department encourages proposals that attract more private capital and induce larger-scale, private domestic investments. The Department also encourages purchase commitments and collaborations across the supply chain to clarify future demand, improve transparency and trust, and mitigate the risk of future supply chain shortages or oversupply.

3. Financial Strength

The CHIPS Incentives Program does not provide enough funding on its own to create the capacity needed to meet the program’s economic and national security objectives. Applicants should structure the finances of their project in a way that maximizes private-sector contributions and minimizes the need for government incentives. The Department may decline to award CHIPS Incentives if the applicant has not demonstrated sufficient efforts to maximize the use of private-sector funds. The Department will evaluate the degree to which the applicant, through its funding request, leverages private investment, incentives provided by state and local governments, and the Investment Tax Credit (to the extent applicable) to increase scale and

33 See 15 U.S.C. § 4652(a)(2)(B)(ii)(V)(aa).

34 See 15 U.S.C. § 4652(a)(2)(B)(ii)(V)(bb).

lower the need for CHIPS Incentives. The Department will also ask applicants to submit a financial model, which will inform a comprehensive assessment of a project’s finances.

4. Project Technical Feasibility and Readiness Timely construction and effective operation of facilities is crucial to the overall success of the CHIPS Incentives Program. Project technical feasibility includes the ability of the applicant to construct, equip, and operate the proposed project. To demonstrate technical feasibility, applicants will be asked to provide a construction plan, including a construction schedule and a list of key partners, contractors, and suppliers.

Activities funded under this NOFO will be subject to various Federal, state, and local environmental and permitting requirements. The Department intends to prioritize applications that demonstrate a clear path to meeting these requirements in a timely manner. This path could include reducing or mitigating potential environmental impacts (including impacts on communities with environmental justice concerns), enhancing community engagement, identifying steps to reduce costs and barriers to construction, using existing infrastructure or making mitigation commitments, and securing agreements or support from state and local permitting authorities to ensure projects stay on schedule.

The applicant should identify the necessary environmental compliance and permitting steps for the proposed project, and, as relevant, for each individual activity within each individual project.

Applicants are strongly encouraged to design their projects to minimize the potential for adverse impacts on the environment and the local community (including communities with environmental justice concerns), including by taking steps to prevent pollution and by relying as much as possible on clean energy to operate their projects. Applicants are also encouraged to describe the design features, construction methods, and operation strategies they will employ to increase resilience from weather- and climate-related risks and the metrics and processes the applicant will use to measure and track any climate and environmental responsibility goals and commitments.

5. Workforce and Community Investment The CHIPS Act requires applicants to make commitments to worker and community investment.35 Each applicant will therefore be asked in their full application to submit a “workforce and community investment” plan that sets forth (1) their strategy for investing in their construction and facility workforces, and (2) their strategy for community investment. As detailed in Section I.B.5 above, consortium members may collaborate on various parts of the plan.

35 See 15 U.S.C. § 4652(a)(2)(B)(ii)(II).

a. Workforce Development36

A strong, long-term workforce strategy is critical to achieving the economic and national security goals of the CHIPS Act. Each applicant will therefore lay out their strategy to recruit, train, hire, retain, and upskill a diverse workforce in good jobs at their facility. The Good Jobs Principles37 published by the Departments of Commerce and Labor outline the elements of a good job, including recruitment and hiring practices, pay and benefits, job security and working conditions, worker empowerment, skills and career advancement, and organizational culture. All applicants must comply with all applicable Federal labor and employment laws, including but not limited to Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Occupational Safety and Health Act, and the National Labor Relations Act, which protects employees’ right to bargain collectively and engage in concerted activities for the purpose of workers’ mutual aid or protection.

To be eligible for CHIPS funding, applicants must secure “commitments from regional educational and training entities and institutions of higher education to provide workforce training, including programming for training and job placement of economically disadvantaged individuals.”38 Applicants are strongly encouraged to work with such partners to articulate their approach to meeting their facility and construction workforce needs through training and recruitment of American workers, as well as to consider applying as part of a consortium that includes such partners. For both their facility and construction workforce, applicants must provide a workforce needs assessment; outline evidence-informed strategies for recruitment, training, and retention; and describe their approach to ensuring job quality.

Recruiting, training, and retaining a diverse and skilled set of workers will necessitate building new pipelines for workers, including specific efforts to attract economically disadvantaged individuals39 and thereby promote diversity, equity, inclusion, and accessibility. For both their facility and construction workforces, applicants must therefore document how they will expand access for economically disadvantaged individuals, including how their recruitment, training, and retention strategies will be tailored to address the needs of these workers.

The Department strongly encourages applicants to leverage evidence-informed recruitment, training, and retention strategies to increase the participation of economically disadvantaged individuals. For example, although applicants are not required to provide a plan for access to child care for facility and construction workers because awards of CHIPS Direct Funding under this NOFO will not exceed the $150 million threshold established in the first NOFO, applicants are encouraged to consider providing those workers with access to child care. For more details on programs and practices to attract and retain economically disadvantaged individuals—

36 For additional resources on the information presented here, applicants are encouraged to consult the appendix of the CHIPS Program Office, Workforce Development Planning Guide.

37 See U.S. Department of Commerce and U.S. Department of Labor, Good Jobs Principles (2022).

38 See 15 U.S.C. § 4652(a)(2)(B)(ii)(III).

39 See 15 U.S.C. § 4652(a)(2)(B)(ii); Definition of “economically disadvantaged individuals” in the Appendix.

https://www.nist.gov/system/files/documents/2023/03/30/CHIPS%20Workforce%20Development%20Planning%20Guide%20%281%29.pdf https://www.dol.gov/general/good-jobs/principles including Registered Apprenticeships and wraparound services—applicants are encouraged to consult the CHIPS Program Office Workforce Development Guide.40

An effective workforce strategy for both facility and construction workers will be informed by, and demonstrate support and commitments from, a diverse set of community and public-sector entities. Engaging with educational institutions at all levels will be key to training the next generation of workers, including commitments to work with K-12 institutions, develop and strengthen career and technical education, and work with programs at existing construction training centers. Strong applications will reflect a comprehensive approach to building inclusive workforce pipelines through participating in sectoral partnerships,41 especially with semiconductor fabrication facilities or other supply chain companies in their cluster. Sectoral partnerships can play an integral role in the development and implementation of high-quality, equitable workforce development strategies.

Applicants are likewise strongly encouraged to engage with a broad array of strategic partners, including but not limited to labor unions; workforce development organizations; state and local workforce boards; educational institutions, including Minority-Serving Institutions;

semiconductor fabrication companies; and other relevant entities. Applicants should describe their engagements with strategic partners as part of their applications, and the strongest applicants will, wherever possible, engage with a wide array of strategic partners to leverage the broadest view of potential workforce solutions. The Department encourages applicants applying as part of consortia to include such partners in their consortium and to leverage those relationships in putting together a comprehensive workforce strategy.

The Department strongly encourages the use of project labor agreements in connection with construction projects.42 Applicants that commit to using best-practice project labor agreements will generally be likely to produce a construction workforce strategy that meets the criteria in this NOFO.