Uncle Sam Extends 25% CHIPS Act Tax Credit To Wafer, Solar Panel Manufacturing

The lion's share of the CHIPS Act funding has already been allocated, but Uncle Sam still has tax breaks to hand out, and it's not even being that picky about which kind of chips are eligible.

On Tuesday the Biden administration extended a 25 percent tax credit to another kind of wafer manufacturing: that of photovoltaic cells used in solar panels. The credits are part of the broader CHIPS and Science Act funding bill signed into law in August 2022.

Under proposed rules published last year, tax credits were made available to companies building semiconductor or equipment manufacturing facilities in the US after August 9, 2022. The rules do come with a proviso, however, that the Internal Revenue Service (IRS) will claw back any tax credits given if a company expands its semiconductor manufacturing capacity in a country of concern, which for all intents and purposes means China.

The updated rules, finalized this week, provide additional clarity on what constitutes an "advanced manufacturing facility," with wafer and solar panel manufacturing the two main call outs.

While wafer manufacturing makes sense for a bill aimed at securing US supply chains, solar is a notable addition, especially considering how quickly energy supply has become a concern amid the ongoing AI arms race. Having said that, technically, solar panels are semiconductors even if they're downright primordial compared to the chips used in modern datacenters.

"Today's final guidance provides critical certainty for semiconductor and solar manufacturers to make generational investments in communities across the country. Semiconductor manufacturing investments are supporting over 125,000 jobs and will ensure that the United States leads the world in advanced manufacturing not just for the next few years, but for the next few decades," National Economic Advisor Lael Brainard opined in a canned statement.

Wafer production and solar may not be the only additions either. In a news release on Tuesday, the Treasury Department and IRS noted that they were working with other agencies to extend the credits to other areas where appropriate.

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The finalized guidance comes as the US Commerce Department works to disburse the remainder of the 39 billion in subsidies made available to foundry operators under the CHIPS Act.

According to the Treasury, $36 billion of the funds have already been allocated across 20 states. Unsurprisingly, the majority of that funding has been claimed by a handful of chipmakers, most notably Intel, Samsung, and TSMC, which are currently in the process of building leading edge chip fabs in Arizona, Ohio, and Texas.

However, there remains a decent chunk of funding for smaller, more niche players in the semiconductor space. Last week, Infinera, which produces chips used in optical networking equipment, scored up to $93 million in CHIPS funding to support the expansion and modernization of its chip plants and packaging facilities in California and Pennsylvania. The investments are expected to boost the company's domestic manufacturing capacity tenfold. ®