On February 28, 2023, the National Institute of Standards and Technology’s (NIST’s) CHIPS Program Office published the first Funding Opportunity Announcement (FOA) under the CHIPS and Science Act (for background on this Act, see Wilson Sonsini’s prior alert, here). This initial FOA is directed towards funding the construction, expansion, or modernization of commercial facilities for the front- and back-end fabrication of leading-edge, current-generation, and mature-node semiconductors. Those interested in obtaining funds should review the FOA and related documentation at https://www.nist.gov/chips/notice-funding-opportunity-commercial-fabrication-facilities. Further FOAs focused on funding opportunities for facilities that build semiconductor materials and manufacturing equipment and facilities that support semiconductor research and development will be released later this year. A brief outline of the eligibility requirements, application process, and evaluation criteria for this initial FOA are set forth below:

What Type of Funding Is Available?

The U.S. Department of Commerce will provide funding as a combination of direct funding (e.g., grants, cooperative agreements, or other transactions), loans, and/or loan guarantees. CHIPS awards are meant to complement private investment and other sources of funding, so the anticipated total amount of an award, inclusive of direct funding and the principal amount of a loan or loan guarantee, will not exceed 35 percent of project capital expenditures, with direct funding accounting for between 5-15 percent of project capital expenditures.

Who Can Apply?

Any nonprofit entity, private entity, consortium of private entities, or consortium of nonprofit, public, and private entities with a demonstrated ability to substantially finance, construct, or expand a facility covered by the FOA is eligible to apply. According to the FOA, while, generally speaking, applicants should be domestic legal entities, in “exceptional cases” at the sole discretion of the Department of Commerce, a foreign entity may be permitted to apply and receive a CHIPS award.

What Is the Application Process?

The FOA sets forth a five-stage application process:

1. Submission of a statement of interest–A brief description of the proposed project so that the CHIPS Program Office can gauge interest in the program and plan for further review.
2. Submission of a pre-application (recommended)–A more detailed description of the applicant’s project plans. The CHIPS Program Office will provide written feedback on the pre-application, including a recommendation to the applicant for next steps.
3. Submission of a full application–Detailed information on the project(s), including the technical and financial feasibility and alignment with economic and national security objectives. If the CHIPS Program Office intends to move into the due diligence phase, it will prepare and seek agreement to a nonbinding Preliminary Memorandum of Terms.
4. Due diligence by the CHIPS Program Office–During this stage, the applicant will be required to provide additional information on national security, financial, environmental, and other issues.
5. Award preparation and issuance–Direct funding and loans will be disbursed in tranches tied to project milestones.

All interested applicants must first submit a statement of interest. The statement of interest must be submitted at least 21 days prior to submission of either a pre-application or a full application. The required elements of the statement of interest are available here.

Applications (pre-applications are optional for leading-edge projects) for leading-edge facilities will be accepted on a rolling basis starting March 31, 2023. For current-generation, mature-node and back-end production facilities, pre-applications (which are recommended) will be accepted on a rolling basis starting on May 1, 2023, and full applications beginning on June 26, 2023.

Interested applicants must also register at https://www.sam.gov.

How Will Applications Be Evaluated?

There are six areas of evaluation, the first being weighted most heavily and the five others being weighted approximately equally.

1. Economic and National Security–The economic component assesses how an application advances economic security by building sustainable domestic capacity that reduces U.S. reliance on vulnerable or overly concentrated production. The national security component assesses whether applicants address national security considerations, including by securing supply chains for technologies, and also will assess a project’s operational vulnerabilities and resilience to threats from foreign entities of concern (a broad list that includes entities under the jurisdiction of selected nations, including China, Russia, and Iran).
2. Commercial Viability–This component will assess an applicant’s plan for reliable cash flow and continued investment, and an applicant’s commitment to making the investments and upgrades necessary to ensure that the facility remains commercially viable over the long term.
3. Financial Strength–This component will assess the detailed financial model applicants will prepare for the proposed project, including projected cash flows, internal rates of return, profitability metrics, and private-sector contributions.
4. Project Technical Feasibility and Readiness–This component will assess the project execution plan for technical feasibility, including major construction and operational milestones, construction rights and permits, and key contractual arrangements. Applicants who explain how they plan to meet environmental and permitting requirements in a timely fashion will be prioritized. This component will also assess the applicant’s relevant experience and expertise to support successful execution at the envisioned scale.
5. Workforce Development–This component will assess an applicant’s plan to developing and maintaining a highly skilled, diverse workforce. Of note, any applicant requesting more than $150 million in funding must provide a plan for access to affordable, accessible, reliable, and high-quality childcare for both facility and construction workers.
6. Broader Impacts–This component will assess an applicant’s plans to commit to future investment in the U.S. semiconductor industry, including to build R&D facilities in the United States; support CHIPS research and development programs; create opportunities for minority-owned, veteran-owned, and women-owned businesses; demonstrate climate and environmental responsibility; invest in their communities by addressing barriers to economic inclusion; and commit to using iron, steel, and construction materials produced in the United States.

Will There Be Other Funding Opportunities?

The CHIPS Program Office anticipates two additional funding opportunities. One in late spring 2023, focused on the construction, expansion, or modernization of facilities for semiconductor materials and manufacturing equipment is expected. The other, in early fall 2023, for the construction, expansion, or modernization of facilities for research and development is expected.

This first CHIPS FOA presents a great opportunity for semiconductor companies to obtain federal funding to build or expand operations. Parties who seek to apply for funding under this FOA should ensure they understand and can meet the requirements of the FOA and interested parties should continue to monitor nist.gov/chips for more information on this and future FOAs.