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In a news release issued June 17, silicon, germanium); doping mate- The report states that many U.S.
2021, the U.S. Senate Committee on rial (e.g., boron, phosphorus, arsenic); leaders in semiconductors operate with
Finance announced the introduction of size (generally, up to 300 millimeters a fabless business model, providing
the previously noted FABS Act, which or 12 inches); thickness (generally, their designs to a third-party foundry
proposed a 25% ITC for domestic up to 775 micrometers); and surface company (also referred to as a “pure-
manufacturing of semiconductors, co- characteristics (e.g., flatness, particle play semiconductor foundry”) that
sponsored by Sen. Ron Wyden, D-Ore., density, haze). Wafers meet the physics specializes in contract manufacturing
and Sen. Mike Crapo, R-Idaho. As part definition of semiconductor and are of semiconductors. Foundry companies
of the release, Sen. Wyden stated: the primary source material for the sometimes provide additional capacity
chip or integrated circuit manufactur- or otherwise produce certain chips for
Chips are a critical technology in ing process. IDMs. Furthermore, the fabless-foundry
our economy, as recent supply chain Despite wafers’ being an essential model has become increasingly prevalent
disruptions and shortages have part of the semiconductor supply chain, as the costs of building and maintaining
made crystal clear. The supply of it is unclear whether Congress intended a state-of-the-art semiconductor manu-
everything from computers to cars the term “semiconductor” under Sec. facturing facility have skyrocketed, and
is affected by these shortages, and 48D to include the manufacturing of continued advances in chipmaking tech-
the way to fix this problem is to wafers or other essential supply chain nology require entirely new, increasingly
bring chip manufacturing back to materials. Moreover, various types of costly fabrication equipment.²⁷
the United States. Our bill would equipment are used across the entire In removing “processing and re-
provide a significant investment tax life cycle of semiconductor manufactur- search” from the CHIPS Act of 2022’s
credit to companies that build chips ing, and the definition of “semiconduc- final language, Congress may have con-
here at home, rather than overseas. tor” will heavily influence what type of sidered the availability of other tax and
equipment constitutes “semiconductor nontax incentives for such activities,
Further, Sen. Crapo stated, “It is manufacturing equipment” for pur- specifically the Sec. 41 R&D credit,
critical that we leverage federal govern- poses of the Sec. 48D credit. Note that as well as grants and/or loans under
ment incentives to bolster American companies that fall into this gray area the CHIPS for America incentive pro-
companies and bring chip and semi- related to the semiconductor supply gram through Commerce, as noted, to
conductor manufacturing back to the chain would be able to explore potential incentivize investments in facilities and
United States. This tax incentive is a grants under the CHIPS for America equipment in the United States for the
great step toward our goal of fortifying incentive program through Commerce. fabrication, assembly, testing, advanced
our supply chains, strengthening na- packaging, production, or research and
tional security, and boosting economic Semiconductor fabs development of semiconductors, materi-
competitiveness.”²⁶ Based on the news Based on the White House’s 100-Day als used to manufacture semiconduc-
releases, one could infer that Congress Report prepared under Executive Order tors, or semiconductor manufacturing
intended for the term “semiconductor” 14017, there are two basic industry equipment. Because the R&D credit is
under Sec. 48D to include chips or in- models for semiconductor fabs: (1) generally calculated based on incremen-
tegrated circuits, as defined by the SIA. the vertically integrated device manu- tal qualified research expenditures from
Beyond semiconductor chips or facturer (IDM) model, where IDMs prior years, it generally would not pro-
integrated circuits, there is less certainty perform all of the steps in the semicon- vide the same level of benefit as a 25%
regarding whether Congress intended ductor manufacturing process — from credit for qualified research investment.
the term to include semiconducting design to final testing, accounting for As noted previously, buildings or
materials used to produce the final about two-thirds of global semicon- their structural components, includ-
product, such as wafer substrates. Wafer ductor production capacity — and (2) ing portions of them, used for offices,
manufacturing is itself a complex the fabless-foundry business model, in administrative services, or other func-
process resulting in characteristics which the design process is separate tions unrelated to manufacturing do not
that vary by source material (e.g., from the manufacturing process. satisfy the requirements as “qualified

26. Senate Committee on Finance, “Wyden, Crapo, Cornyn, Warner, Daines, 27. See White House, “Building Resilient Supply Chains, Revitalizing American
Stabenow Introduce Bill to Boost Domestic Manufacturing of Semiconduc- Manufacturing, and Fostering Broad-Based Growth: 100-Day Reviews
tors” (June 17, 2021). Under Executive Order 14017” (June 2021).

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