CHIPS Act tax credit eligibility for semiconductor material suppliers could significantly strengthen U.S. semiconductor independence, attract foreign direct investment, and secure long-term leadership in the global chip race.
The global semiconductor landscape is undergoing a strategic realignment, with the U.S. making bold moves to secure its position. In a critical development, SEMI—one of the leading global industry associations for electronics manufacturing has voiced strong support for legislation expanding the CHIPS and Science Act’s tax credit eligibility to include semiconductor materials suppliers.
This legislative push is vital to building a more robust and resilient semiconductor supply chain on American soil.
Understanding the CHIPS and Science Act
Enacted in 2022, the CHIPS and Science Act allocates over $52 billion in federal funding to revitalize America’s domestic semiconductor industry. It includes:
- $39 billion in direct incentives to semiconductor manufacturers.
- $11 billion for semiconductor R&D and workforce development.
- A 25% Investment Tax Credit (ITC) for companies investing in chip fabrication or related equipment manufacturing.
However, a notable gap remains: semiconductor materials suppliers, critical to semiconductor fabrication, are currently not eligible for these tax credits.
Why Materials Suppliers Matter
Materials suppliers provide the backbone of chip production. From silicon wafers and photoresists to speciality gases and chemicals, these materials are essential to nearly every step in semiconductor manufacturing.
According to SEMI, excluding these companies from tax incentives creates a bottleneck in the ecosystem, leaving the U.S. reliant on foreign suppliers, particularly in Asia.
Expanding tax credit eligibility to this segment could help reshore supply chains, mitigate geopolitical risks, and reduce production delays.
SEMI’s Position and Policy Advocacy
Joe Stockunas, President of SEMI Americas, stated:
“The success of the CHIPS Act depends on the strength of the entire supply chain, not just the fabrication plants. Including materials suppliers in the tax credit program will help attract long-term investment and innovation on U.S. soil.”
SEMI has consistently advocated for broader tax credit eligibility. The association emphasized that comprehensive support for the supply chain—from fabs to materials and toolmakers—is essential to meeting the act’s objectives.
Recent Legislative Momentum
In 2024 and early 2025, several bills and amendments were introduced to close funding and eligibility gaps:
Spectrum and National Security Act – Section 602
This provision seeks to restore $3.5 billion previously diverted to secure enclave initiatives. It aims to:
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Support commercial R&D funding that was deprioritized in 2024.
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Ensure companies engaged in materials science and semiconductor innovation aren’t left out of CHIPS Act incentives.
SEMI praised the move, calling it a “crucial correction” that will prevent the erosion of private-sector confidence in U.S. industrial policy.
Semiconductor Technology Advancement and Research (STAR) Act
Supported by the Semiconductor Industry Association (SIA), this bill proposes extending tax credits to semiconductor design companies—a parallel effort to broaden the act’s reach. SEMI believes both design and materials arms of the supply chain deserve equal footing.
Tax Clarity from the U.S. Treasury
In October 2024, the U.S. Department of Treasury and the IRS finalized rules for the Advanced Manufacturing Investment Credit, the tax mechanism under the CHIPS Act. These regulations provided:
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A clear definition of “qualified property.”
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Guidelines for how companies can claim and transfer credits.
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Clarifications on eligibility for chipmaking and equipment providers.
Yet, materials suppliers were still largely excluded. SEMI hopes new legislative action will fix this oversight in 2025.
Economic Impact of CHIPS Act So Far
According to SIA and SEMI:
- Over 90 semiconductor projects have been announced since the CHIPS Act passed.
- These projects represent $450 billion in private investment.
- More than 58,000 new jobs have been created in the chip sector.
Yet, analysts warn that without inclusion of upstream suppliers (like those in materials science), the supply chain remains fragile and susceptible to external shocks.
Industry Reaction and Coalition Support
Major industry players have echoed SEMI’s position. Among the supporters:
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Entegris Inc.: A materials giant that recently broke ground on a $500 million manufacturing facility in Colorado, specifically voiced support for expanded incentives.
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Dupont Electronics & Industrial: Urged Congress to take an “ecosystem approach” to federal subsidies.
Dr. Luc van den Hove, CEO of imec, remarked:
“The semiconductor supply chain is only as strong as its weakest link. If we don’t support the foundational input providers, the entire system slows down.”
Global Competition and Strategic Urgency
Countries like Japan, South Korea, Taiwan, and Germany have launched similar subsidy programs that explicitly include materials and chemical suppliers.
Key Global Comparisons:
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Japan’s LSI Chips Program includes tax breaks for materials manufacturers working with Rapidus.
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Germany’s IPCEI on Microelectronics program funds entire ecosystems, including base materials.
The U.S. risks falling behind unless its incentive programs match the breadth and depth of foreign competitors.
What’s Next?
The proposed expansion of the CHIPS Act investment tax credit is expected to be reintroduced in the Senate Commerce Committee during the summer 2025 session. Industry leaders are hopeful for bipartisan support given the national security and economic competitiveness implications.
SEMI continues to meet with lawmakers, economic advisors, and international partners to ensure a “whole-of-supply-chain” approach is prioritized in U.S. legislation.
Securing the Future of U.S. Semiconductors
The push to expand CHIPS Act tax credit eligibility marks a critical inflection point in America’s industrial policy.
With strong backing from SEMI and key industry voices, there’s growing momentum to ensure that materials suppliers, the unsung heroes of chip manufacturing, receive the support they deserve.
If enacted, this move on CHIPS Act tax credit eligibility for semiconductor material suppliers could significantly strengthen U.S. semiconductor independence, attract foreign direct investment, and secure long-term leadership in the global chip race.
