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Tips for Tech Companies Hoping to Expand in Ohio Under the CHIPS Act

When people think of technological hubs in the United States, they often think of the West Coast and, more specifically, Silicon Valley. But there is soon to be a Silicon Heartland based in Ohio following Intel's groundbreaking for what will be the world's largest semiconductor fabrication facility. Thanks to the passage of the CHIPS and Science Act, aimed at encouraging more investment in the tech sector to help produce more semiconductor chips here in the U.S., companies large and small are considering how to invest in the next generation of semiconductor manufacturing and considering lucrative federal incentives as a catalyst to this growth.

One of the stated goals of the CHIPS Act is to help the U.S. address supply chain issues and to challenge China's absolute dominance of the microchip industry. The program could potentially provide $54 billion in incentives in the form of loan guarantees, loans, grants, cooperative agreements and more to businesses that develop facilities in the U.S. It is important that companies hoping to leverage these opportunities are prepared. Read on for some considerations.

U.S. Department of Commerce (DOC) is Seeking Prioritized Projects

Previous legislation created a CHIPS office in the U.S. Department of Commerce to implement the programs within the CHIPS Act and to oversee the billions of dollars aimed at increasing American competitiveness. The DOC has shared some guidance indicating how they will address the proposals seeking federal assistance, and which projects are more desirable for CHIPS funding, and how they will responsibly manage federal funds.

First, the DOC is encouraging projects that can efficiently operate at scale to support multiple high-cost production lines with associated supplier ecosystems. Congress' intent is to ensure the U.S. can rapidly onshore production for legacy chips in critical industries like automotive and national security suppliers, while at the same time investing into new cutting-edge technology for the next generation of devices and beyond. Projects that can immediately affect large scale production will help close this gap on U.S. manufacturing, research and development.

A separate program created by the CHIPS for America Act established an investment tax credit for investments in facilities and equipment for the manufacturing of semiconductors. Any applicant for CHIPS grants and competitive federal awards must also include analysis of how the Investment Tax Credit will be utilized and how it will impact the financial viability of the project.

Additional DOC priorities include projects that:

  • Secure current generation and legacy chips for national security purposes
  • Reduce single sourcing and geographic choke points, weather-related disruptions, or counterfeiting in the supply chain
  • Have a workforce development partnership with economic development programs that participate/create paid training and apprenticeship programs
  • Have a recruitment strategy, especially for targeted populations of underrepresented communities in the industry, including those that plan for childcare, transportation partnerships, mentoring, and career counseling
  • Work with/outreach to veteran and minority-owned small businesses for contracting and investments

Planning for these considerations can help a company prepare to take advantage of CHIPS funding.

Accountability for CHIPS Projects and Considerations for Interested Applicants

CHIPS incentives do not come without restrictions. There is accountability for projects that receive funding through this act. Questions that DOC is expected to ask of applicants include:

  • Does the project increase scale production and attract/leverage private capital?
  • Does the project require significant industrial infrastructure?
  • Can the applicant show purchase commitments and other initiatives to improve transparency and financial viability to de-risk the project, induce larger-scale and attract more capital?
  • Can the applicant collaborate within the supply chain to clarify demand and mitigate shortages or oversupply – consortium or partnerships with upstream and equipment providers?
  • Can the applicant secure additional financial incentives to build regional/local industry clusters and supply chain corridors?
  • As part of the project, can the applicant show improvements to workforce-related development and needs?
  • Does the project have a plan for continued investment or upgrades to ensure the facility remains competitive and commercially viable for its useful life?

In order to also provide transparent oversight and ensure that American companies and supply chains are the primary beneficiary of federal investments in the semiconductor industry, applicants will be required to work with the DOC and may need to provide detailed, project-specific and company-level financial information to comply with CHIPS Act requirements such as:

  • To not send technology abroad, or use funds for expansion or investments in facilities in nations of concern
  • To ensure a project is financial viability through sponsor and private capital contribution audits, project debt and equity ratios, and transparent terms for loans, fees and costs
  • Minimize the amount of federal funding required by leveraging state local and private funding (final guidance is forthcoming)
  • Show that projects will be able to sustain operations without additional federal support for the useful life of the facility

Get Help Learning About the Incentives

Those that choose to build or expand facilities in Ohio may well derive direct financial benefits from those decisions if they plan carefully. Companies hoping to make use of this federal incentives program will need to partner with the right supports and set achievable goals within the industry, as well as articulate how they plan to help the surrounding community and invest in their workforce. Historically, navigating such programs has been a complicated process, and small mistakes could change your business' eligibility for certain programs. Calfee, Halter & Griswold LLP looks forward to working with companies hoping to expand their tech production in Ohio.

Calfee Connections blogs, vlogs and other educational content are intended to inform and educate readers about legal developments and are not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results. The opinions expressed may not necessarily reflect the view points of all attorneys and professionals of Calfee, Halter & Griswold LLP or its subsidiary. Updates related to all COVID-19 government assistance programs are provided with the most current information made available to Calfee at the time of publication. Clarifications and further guidance are being disseminated from government authorities on an ongoing basis. All information should be reaffirmed prior to the submission of any application and/or program participation.

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