Semiconductor Equipment Financing and the CHIPS Act

In a world where semiconductor equipment is becoming more and more essential, the ability to finance semiconductor devices is becoming increasingly important. Business financing, however, can be a tricky process—especially when it comes to cutting-edge equipment like those used in the semiconductor industry. The CHIPS Act, which was recently introduced in the U.S. Senate, seeks to address this issue by providing access to better business financing options for semiconductor manufacturers and suppliers alike. In this blog post, we will discuss the ins and outs of the CHIPS Act as well as how it could potentially revolutionize semiconductor equipment financing. Will your semiconductor business be ready to grow and expand in the next decade? 

Semiconductor Business Financing and the CHIPS Act

The global economy relies heavily on semiconductors, which can be found in household appliances, cars, and fighter jets. Due to the country’s dependence on foreign semiconductors, semiconductor shortages in recent years have greatly affected manufacturers, including the automotive industry.

Using government funding and tax credits, CHIPS aims to increase domestic semiconductor production and reduce reliance on imported chips.

Semiconductor equipment financing is critical for the production of integrated circuits (ICs), and the United States has been a world leader in IC production. However, the cost of new semiconductor manufacturing facilities has been rising, and U.S. companies have been investing less in new semiconductor fabs than their foreign competitors. The Semiconductor Equipment Financing and CHIPS Act would provide $2 billion in federal financing to support the construction of new semiconductor manufacturing facilities in the United States.

This act would create a new program at the Department of Commerce to provide business loans and loan guarantees for the construction of new semiconductor manufacturing facilities. The program would be available to companies that are majority owned by U.S. investors, and at least a portion of the facility must be located in the United States. The maximum loan amount would be $1 billion, and the interest rate would be capped at 4%.

This business financing would be an important step in ensuring that the United States remains a world leader in semiconductor production. It would also create jobs throughout the supply chain, from construction workers to engineers to technicians. In addition, this act would help to keep critical manufacturing capabilities within our borders, which is essential for our national security.

The CHIPS Act

The CHIPS Act, or the Creating Helpful Incentives to Produce Semiconductors that are Essential to National Security Act, was introduced in the Senate on March 3, 2021. The bill would provide $52 billion in funding for the construction of new semiconductor manufacturing facilities in the United States and for research and development of cutting-edge semiconductor technologies.

If enacted, the CHIPS Act would be the largest investment in semiconductor manufacturing and R&D in U.S. history. The bill is co-sponsored by Senators Chuck Schumer (D-NY) and John Cornyn (R-TX), who said “semiconductors are essential to our national defense, our economy, and our way of life.”

The bill comes at a time when the global semiconductor industry is facing significant challenges. The COVID-19 pandemic has disrupted supply chains and caused a decrease in demand for semiconductors. Additionally, China has been rapidly increasing its investment in semiconductor manufacturing, putting the United States at risk of losing its position as the world’s leading producer of these critical semiconductor components.

The CHIPS Act would address these challenges by investing in American manufacturing and research so that the United States can maintain its leadership role in the global semiconductor industry. The bill has strong bipartisan support and is endorsed by major industry associations including the Semiconductor Industry Association (SIA) and the National Association of Manufacturers (NAM).

The Impact of the CHIPS Act on Semiconductor Equipment Financing

The CHIPS Act, or the Creating High-Powered Incentives for Semiconductor Manufacturing Act, was On August 9, 2022, President Biden signed into law the CHIPS and Science Act of 2022 with the intention of incentivizing semiconductor manufacturing in the United States. The act offers a tax credit of up to 25% for equipment purchases, with the maximum credit capped at $2.5 billion over five years. The credit is available to both new and existing facilities, and can be applied retroactively to purchases.

The impact of the CHIPS Act on semiconductor equipment financing is expected to be significant. The tax credit will reduce the cost of equipment purchases, making it more affordable for companies to expand their manufacturing capacity. This is expected to lead to increased demand for equipment financing products and services.

Equipment financing companies will need to adapt their offerings to meet the needs of companies seeking to take advantage of the CHIPS Act tax credit. For example, many equipment finance companies may need to increase their lending limits in order to finance large semiconductor equipment purchases. Additionally, mid market lenders will need to develop mid market loans  that specifically target semiconductor manufacturing equipment. Equipment lenders like Trust Capital are poised to lend to businesses to help companies grow and thrive. 

The CHIPS Act is expected to have a positive impact on the semiconductor industry and the economy as a whole. By making it more affordable for companies to invest in manufacturing capacity, the act will help ensure that the United States remains a leader in this critical sector.

Final Thoughts on Semiconductor Equipment Financing and the CHIPS Act

The CHIPS Act is a great step forward in providing US semiconductor equipment companies with access to business funding and the ability to remain competitive. If you are a chip manufacturer and you need semiconductor equipment financing then you can visit Trust Capital USA because our team will feel happy to help you with semiconductor equipment financing. We offer zero down and no prepayment loans on terms up to seven years with low interest rates. It provides an avenue for manufacturers to secure financing for their semiconductor equipment investments, allowing them to expand their operations and innovate faster. The CHIPS Act will provide much-needed support for the semiconductor industry, which will benefit not only US businesses but also consumers around the world who rely on these technologies every day.