There were many vital takeaways from our recent What’s Next? interview with Dr. Melissa Flagg and Dr. Jennifer Buss on the Chips and Science Act of 2022, but the most crucial insights from Flagg and Buss were about the future role of the Department of Commerce and the NIST (National Institute of Standards and Technology, which is housed at Commerce) in the implementation of the legislation.

As Dr. Buss commented: “Is the Department of Commerce able to execute?  It’s not a knock on Commerce. It’s just the way that the organizations are set up.”  Dr. Flagg added:  “I think we’ve done this to them.  They’re going to hand all this money to Congress and/or to Commerce and say, ‘Spend it in a year.’ And then they’re going to  come back four months later and say, “Tell me what progress you are making.” That’s not even enough time to hire a contracting officer.”

Regarding NIST, Flagg is “quite bullish on NIST.”  Buss agreed:  ” I think NIST does a wonderful job, not just working with industry, but the industry associations and getting the buy-in from even broader groups and the small companies that don’t have a big say in what’s going on. NIST is going to do what NIST does – and it’s a good thing.  I think as we start to see more of [the] advanced packaging and 3D construction of chips, it’s going to be much more important for NIST to have those standards in place, and doing that now is hugely important  – so that they’re not backtracking and having to fill it in later.”

The implementation of the Chips and Science Act of 202 is, arguably, a marathon not a sprint (although the three to five-year timeline of the law is structured as a spring, which is a telling data point in and of itself).

OODA Loop is tracking this implementation phase.  In the last few weeks, Commerce and NIST both provided the following signals and outcomes.

Department of Commerce:  Chips for America

“A Strategy for the Chips for America Fund”

On September 6th, “the U.S. Department of Commerce released its strategy outlining how the Department will implement $50 billion from the bipartisan CHIPS Act of 2022, signed by President Biden last month. The CHIPS for America program, housed within the Department’s National Institute of Standards and Technology (NIST), will revitalize the domestic semiconductor industry and spur innovation while creating good-paying jobs in communities across the country.

The strategy…outlines the initiatives, strategic goals, and guardrails guiding the CHIPS for America program.

The program’s four primary goals are:

• Establish and expand domestic production of leading-edge semiconductors in the US, of which the US currently makes 0% of the world’s supply
• Build a sufficient and stable supply of mature node semiconductors
• Invest in R&D to ensure the next-generation semiconductor technology is developed and produced in the US.
• Create tens of thousands of good-paying manufacturing jobs and more than a hundred thousand construction jobs. This effort will ensure the pipeline for these jobs expands to include people who have historically not had a chance to participate in this industry, including women, people of color, veterans, and people who live in rural areas.” (2)

The pandemic shed light on what many already knew—moving so much manufacturing overseas over the last several decades put America’s national security and competitive edge at risk. The semiconductor industry’s geographic concentration in Southeast Asia leaves the United States vulnerable to major disruptions from climate events, geopolitical tensions, and global pandemics. In the last year, disruptions in the supply chain for semiconductors have stalled factories, furloughed workers, and reduced access or increased costs for everything from automobiles to appliances, medical devices, mobile phones, and military systems.

The CHIPS for America Fund tackles these problems by reshoring the manufacturing of semiconductors while advancing American research and development (R&D). [and supporting] three distinct initiatives:

1. Large-scale investments in leading-edge manufacturing: The CHIPS incentives program will target approximately three-quarters of the incentives funding, around $28 billion ( The CHIPS Act of 2022 makes available 2 percent of program funds for salaries and expenses, administration, and oversight purposes to carry out the CHIPS incentives program), to establish domestic production of leading-edge logic and memory chips that require the most sophisticated manufacturing processes available today. Those amounts may be available for grants or cooperative agreements, or to subsidize loans or loan guarantees. The Department is still assessing the impact of the newly enacted advanced manufacturing facility investment tax credit on capital expenditures, which will generate significant additional project investment from participants and will reduce the required share of CHIPS incentive funding allocated for leading-edge projects. The Department will seek proposals for the construction or expansion of manufacturing facilities to fabricate, package, assemble, and test these critical components, particularly focusing on projects that involve multiple high-cost production lines and associated supplier ecosystems.
2. New manufacturing capacity for mature and current-generation chips, new and specialty technologies, and for semiconductor industry suppliers: The CHIPS incentives program will increase domestic production of semiconductors across a range of nodes, including chips used in defense, and critical commercial sectors such as autos, information, and communications technology, and medical devices. This initiative is broad and flexible, encouraging industry participants to craft creative proposals. For this initiative, the Department expects dozens of awards with the total value expected to be at least a quarter of the available CHIPS incentives funding, or approximately $10 billion. Those amounts may be available for grants or cooperative agreements, or to subsidize loans or loan guarantees.
3. Initiatives to strengthen U.S. leadership in R&D: The CHIPS R&D program will invest $11 billion in a National Semiconductor Technology Center, a National Advanced Packaging Manufacturing Program, up to three new Manufacturing USA Institutes, and in NIST metrology research and development programs. This constellation of programs is intended to create a dynamic new network of innovation for the semiconductor ecosystem in the United States. Executing this vision will require collaboration with academia, industry, and allied countries, and will require sustained investment over many years.

The CHIPS for America Fund will advance long-term strategic goals:

Unlocking the productive capacity of U.S. industry, workers, and communities will require new thinking and new approaches. We encourage industry and other stakeholders to view CHIPS as a long-term program and a sustained collaboration between the public and private sectors. The Department plans to release a funding announcement for the CHIPS incentives program within six months and will articulate clear eligibility, evaluation, and selection criteria for proposals for the incentive funds. The Department encourages potential applicants to consider ways to:

• Increase scale and attract private capital: The CHIPS incentives program will encourage large-scale investments that attract associated suppliers and workforce investments. In addition to committing their own significant resources, potential applicants are encouraged to explore creative financing structures to tap a variety of sources of capital.
• Leverage collaborations to build out semiconductor ecosystems: The CHIPS incentives program will encourage collaboration between industry stakeholders, investors, customers, designers, suppliers, and international firms. Such collaborations could include purchase commitments, partnerships that enable fabless design, or collaborations between suppliers and producers.
• Secure additional financial incentives and support to build regional and local industry clusters that strengthen communities: The CHIPS incentives program requires applicants to secure state or local incentives. The Department expects to give preference to projects that include state and local incentive packages that maximize regional and local competitiveness, invest in the surrounding community, and prioritize broad economic gains, rather than outsized financial contributions to a single company.
• Establish a secure and resilient semiconductor supply chain: The CHIPS incentives program will prioritize projects that adhere to standards and guidelines on information security, data tracking and verification, and that collaborate on further development and adoption of such standards.
• Expand the workforce pipeline to match increased domestic capacity workforce needs: The CHIPS incentives program will create good-paying jobs that benefit all Americans, including economically disadvantaged individuals and populations that may be underrepresented in the industry. The program will prioritize workforce solutions that enable employers, training providers, workforce development organizations, labor unions, and other key stakeholders to work together. The goal is to create more paid training and experiential apprenticeship programs, provide wrap-around services, prioritize creative recruitment strategies and hire workers based on their acquired skills.
• Create inclusive and broadly shared opportunities for businesses: The CHIPS incentives program will prioritize projects that proactively work to ensure that small businesses; minority-owned, veteran-owned, and women-owned businesses; and businesses in rural areas benefit from the opportunities generated by the program.
• Provide robust financial plans: Applicants will be required to provide detailed project-specific and entity-level financial data to ensure that incentives funds are meeting the economic and national security goals of the program while protecting taxpayer dollars. (3)

NIST:  Strategic Opportunities for U.S. Semiconductor Manufacturing

“Facilitating U.S. Leadership and Competitiveness through Advancements in Measurement and Standards”

This NIST report “outlines seven strategic ‘grand challenges’ in measurement, standardization, and modeling and simulation that, if met, will strengthen the U.S. semiconductor industry…the recently enacted CHIPS and Science Act calls on NIST to conduct critical metrology research and development (R&D) in support of the domestic semiconductor industry to enable advances and breakthroughs for next-generation microelectronics. Metrology is needed at all stages of semiconductor technology development, from basic and applied R&D in the laboratory to demonstrating proof of concept, prototyping at scale, factory fabrication, assembly and packaging, and performance verification prior to final deployment.

 

The NIsT Grand Challenges and Strategy (Source:  NIST)

As devices become smaller and more complex, the ability to measure, monitor, predict and ensure quality in manufacturing becomes much more difficult.  ‘The measurement challenges impacting the U.S. semiconductor industry are at a critical stage and must be addressed if we are to ensure U.S. leadership in this important sector,’ said Under Secretary of Commerce for Standards and Technology and NIST Director Laurie E. Locascio.”  (1)

Department of Commerce:  Incentives, Infrastructure, and Research and Development Needs to Support a Strong Domestic Semiconductor Industry: Summary of Responses to Request for Information.

On September 1st, Commerce” released a summary of responses to a Request for Information (RFI) on incentives, infrastructure, research and development, and workforce needs to support a strong domestic semiconductor industry. The RFI and analysis was developed with support from the National Institute of Standards and Technology (NIST). Respondents — from small and large companies, government, non-profit and other sectors — recommended:

• Close coordination among programs for maximum impact; and
• Adding a private capital multiplier requirement for the financial assistance program to maximize impact

The Department received more than 250 responses from various sectors of the semiconductor supply chain, including design software developers, integrated device manufacturers, materials suppliers, equipment vendors, and automotive and consumer companies. Large businesses accounted for 37% of respondents, while small businesses and nonprofits accounted for 22% and 23%, respectively. The remaining respondents were from academia, government, national laboratories or did not self-identify.”  (4)

Additional recommendations from the RFI survey included:

• Regarding financial incentives, respondents recommended that Commerce support a diverse set of technologies, from leading edge to more mature technologies, and require cost-sharing, matching, and in-kind funding.
• Carefully constructed and clear guidelines around intellectual property (IP).
• Research and design programs, including the NSTC and packaging program, should provide access to design, modeling, and simulation tools, as well as training for such tools.
• Building a skilled workforce was seen as important for all sectors of the semiconductor ecosystem, specifically by increasing the pipeline of students in science, technology, engineering, and math (STEM) career paths and in the semiconductor field by improving partnerships and collaborations between training institutions and employers. (5)

NIST:  Semiconductor Metrology R&D Workshops

Locascio wento on to note. “‘We’ve received extensive feedback from stakeholders across industry, academia, and government that will help us provide urgently needed measurement services, standards, manufacturing methods, and test beds and build even stronger partnerships with this industry.’” (1)

In fact, all of the above-mentioned reports grow out of two April 2022 NIST “Semiconductor Metrology Research and Development virtual workshops to engage with stakeholders across the microelectronics innovation ecosystem to identify the optimal approaches in measurement science, standards development, and measurement services to support U.S. industry.” (6)

What Next?

We remain bullish on NIST and Secretary Raimondo is doing some really dynamic things at Commerce, including the national security messaging, the central role of strategic thinking, and the partnerships with the private sector represented by these recent sophisticated reports and announcements. Internally and operationally, Raimondo and her leadership team seem to have already broken the shackles of the short-term, ‘tactical sprint’ time frame of the Chips Act and aligned their strategic thinking and risk awareness to more of a ‘strategic marathon’ timeline, which is encouraging.

Security and Cybersecurity Implications:  Look for the Bureau of Industry and Security, also housed with the U.S. Department of Commerce, to have a more clear seat at the table in later stages of the CHIPS Act implementations.  Also, the NIST NIST Computer Security Resource Center (CSRC) and Information Security and Privacy Advisory Board are resources that keep showing up in a variety of OODA Loop research contexts, so we have created alerts and/or tracking feeds for their activities as well.

CHIPS.Gov:  Commerce recently launched the CHIPS.Gov website – which we encourage our members to use as an ongoing resource for the latest developments on the Chips Act implementation.   The chips.gov website leads with a list of  “Implementation Priorities”:

“The Department of Commerce will balance urgent needs in the semiconductor industry with long-term strategic goals. The CHIPS program is a marathon, not a sprint. The program includes several tools, some with near-term benefits and many with a longer-term horizon. We encourage participants to view CHIPS as a long-term program and a sustained partnership between the public and private sectors.  As we embark on program design, we have set out the following principles:

• Meet economic and national security needs.  The CHIPS program must address economic and national security risks by building domestic capacity that reduces U.S. reliance on foreign production of both leading edge and older generation microelectronics. U.S. long-term economic and national security requires a sustainable, competitive domestic industry.
• Ensure long-term leadership in the sector.  The CHIPS program will establish a dynamic, collaborative network for semiconductor research and innovation to enable long-term U.S. leadership in the industries of the future. The program will support a diversity of technologies and applications along many stages of product and process development.
• Strengthen and expand regional clusters.  Long-term competitiveness requires large economies of scale and investments across the supply chain. Regional clusters containing manufacturing facilities, suppliers, research and workforce programs, along with supporting infrastructure, will be the foundation for a competitive industry. The CHIPS program will facilitate the expansion, creation and coordination of semiconductor clusters that benefit many companies.
• Catalyze private sector investment.  A successful CHIPS program will respond to market signals, fill market gaps and reduce investment risk to attract significant private capital. The role of government in the CHIPS program is to shift financial incentives to maximize large-scale private investment in production, breakthrough technologies, and workers. The CHIPS program will encourage new ecosystem partnerships that reduce risk, build on U.S. strengths, and facilitate such investments.
• Generate benefits for a broad range of stakeholders and communities.  A successful CHIPS program will create benefits for startups, workers, socially and economically disadvantaged (SEDI) businesses, including minority-owned, veteran-owned and women-owned businesses and rural businesses, universities and colleges, and state and local economies, in addition to supporting semiconductor companies. The CHIPS program will encourage linkages to underserved regions and populations to draw in new participants to the semiconductor ecosystem.
• Protect taxpayer dollars.  The CHIPS program will include a rigorous review of applications along with robust compliance and accountability requirements to ensure taxpayer funds are protected and spent wisely and are not used for dividends, stock buybacks, or windfall profits.”  (CHIPS.Gov | NIST)

The CHIPS Act, the reshoring of manufacturing, and other issues of strategic competitiveness and national security will be discussed at OODAcon 2022 – The Future of Exponential Innovation & Disruption in the context of the following panels:

Swimming with Black Swans – Innovation in an Age of Rapid Disruption

Dawn Meyerriecks, Former Director of CIA Science and Technology Directorate

If Yogi Berra were to evaluate today’s pace of global change, he might simply define it as “the more things change, the more they change”. Are we living in an exponential loop of global change or have we achieved escape velocity into a “to be defined” global future? Experts share their thoughts on leading through unprecedented change and how we position ourselves to maintain organizational resiliency while simultaneously reaping the benefits of new technologies and global realities.

The Future Hasn’t Arrived – Identifying the Next Generation of Technology Requirements

Neal Pollard, Former Global CISO at UBS | Partner, E&Y

Bobbie Stempfley, Former CIO at DISA | Former Director at US CERT | Vice President at Dell

Bill Spalding, Associate Deputy Director of CIA for Digital Innovation

In an age when the cyber and analytics markets are driving hundreds of billions of dollars in investments and solutions is there still room for innovation? This panel brings together executives and investors to identify what gaps exist in their solution stacks and to define what technologies hold the most promise for the future.

Postponing the Apocalypse:  Funding the Next Generation of Innovation

What problem sets and global risks represent strategic investment opportunities that help reduce those risks, but also ensure future global competitiveness in key areas of national defense?  This session will provide insights from investors making key investments in these technologies and fostering future high-value innovation.

OODAcon 2022

To register for OODAcon, go to: OODAcon 2022 – The Future of Exponential Innovation & Disruption

Further Resources

U.S. Chip Fabs “Shovel Ready” as Soon as CHIPS and Science Act of 2022 Signed into Law Today:  As corruption is sending shock waves through China’s chipmaking industry, President Biden signs the CHIPS and Science Act of 2022 into law in the White House Rose Garden.  Following are the fab projects which have been previously announced and will commence groundbreaking activities as soon as the $52 billion semiconductor manufacturing subsidy known as the CHIPS Act is signed into law.

What Next? Dr. Melissa Flagg and Dr. Jennifer Buss on the Chips and Science Act of 2022 (Part 1 of 2):  In Part I of this interview, we discuss the real policy, procurement, and contract management implications of the CHIPS Act weeks after its passage into law.

What Next? Dr. Melissa Flagg and Dr. Jennifer Buss on The Chips and Science Act of 2022 (Part 2 of 2):  In Part II of the interview, we discuss the operational capabilities required to provide true foundational leadership in the semiconductor industry of the future, the talent pipeline challenge, what we are tracking moving forward, and, finally, with the passage of the CHIPS and Science Act of 2022, what is our strongest scenario planning narrative?

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