Congress Should Make the CHIPS Act’s Investment Tax Credit Permanent

Semiconductors represent the backbone of the U.S. economy, powering everything from everyday cell phones and computers to data centers and the military systems that keep the nation safe. As such, the United States needs a strong domestic semiconductor manufacturing base to support economic growth, strengthen supply chains, and remain globally competitive.

Since Congress passed the CHIPS and Science Act, the number of semiconductor manufacturing projects in the United States has continued to rise, aided partly by the Advanced Manufacturing Investment Credit (Section 48D), which incentivizes firms to invest in new facilities. Indeed, data from the Semiconductor Industry Association (SIA) show that semiconductor companies have announced more than 160 new projects across 30 states since 2020. Although this represents significant progress, semiconductor firms may delay new projects as Section 48D’s deadline for beginning construction approaches. Under current law, construction of qualified property must begin by December 31, 2026.

To continue increasing the number of semiconductor facilities in the United States and bolster U.S. economic and technological competitiveness, policymakers should make the Advanced Manufacturing Investment Credit permanent.

Tax credits incentivize semiconductor firms to invest in new semiconductor facilities in the United States by reducing the enormous cost of building them. The Advanced Manufacturing Investment Credit does just that. Congress created Section 48D under the CHIPS and Science Act to encourage companies to expand semiconductor manufacturing in the United States. The credit originally equaled 25 percent of qualified investment in an advanced manufacturing facility, and Congress later increased it to 35 percent for qualified property placed in service after December 31, 2025. In other words, semiconductor companies that invest in qualifying facilities can receive a tax credit equal to as much as 35 percent of their qualified investment. The credit therefore reduces the cost of investing in the United States and gives semiconductor companies a greater incentive to build in America rather than abroad.

Indeed, semiconductor companies have announced significant investments across the United States since 2020. SIA’s dataset begins that year, two years before Congress passed the CHIPS Act, but new project announcements have continued since the law’s enactment. The data show that firms have announced more than 160 semiconductor ecosystem projects across 30 states. Texas has attracted the most projects, with 38, followed by Arizona with 26 and Oregon with 20. Other states have also benefited from new projects. Minnesota, Georgia, and Massachusetts, for instance, have each attracted two projects since 2020. (See figure 1.) Collectively, companies have announced more than $825.8 billion in private investment in semiconductor manufacturing and related supply chain projects.

Figure 1: Number of semiconductor projects by state from 2020 to present

These semiconductor projects are critical to the U.S. economy. First, semiconductors power nearly all of the nation's electronics and advanced technologies, so expanding U.S. semiconductor manufacturing capacity strengthens supply chain resilience. Greater capacity at home reduces the risk that a disruption abroad will severely limit the supply of chips available to U.S. companies. The semiconductor shortages during the COVID-19 pandemic demonstrated this vulnerability, forcing automakers to cut production and contributing to higher prices. The United States does not need to manufacture every semiconductor domestically, but expanding U.S. production can make the country less vulnerable to major disruptions in global supply chains.

Second, new semiconductor projects create jobs and generate additional spending, bolstering U.S. economic growth. Building semiconductor facilities requires billions of dollars in spending on construction, machinery, equipment, and infrastructure. These projects also require engineers, technicians, construction workers, and other employees to build and operate the facilities. This investment creates additional demand for U.S. suppliers and businesses, allowing the economic benefits of semiconductor investment to extend beyond the semiconductor industry itself.

Most importantly, these projects help ensure that the United States remains globally competitive in one of the world’s most strategically important advanced industries. The United States cannot rely solely on its strength in semiconductor design while allowing other countries to capture an increasingly large share of semiconductor manufacturing. Producing more chips domestically allows the United States to retain the manufacturing expertise, skilled workers, suppliers, infrastructure, and technical knowledge that underpin a competitive semiconductor industry. Moreover, domestic manufacturing helps connect U.S. leadership in semiconductor research and chip design with the ability to commercialize and manufacture new technologies at scale. China already leads the United States in production in 7 of the 10 advanced industries that make up ITIF’s Hamilton Index. The United States should not cede further ground in semiconductors.

Policymakers should therefore make the Advanced Manufacturing Investment Credit permanent. Semiconductor companies plan major manufacturing investments years in advance, so policymakers need to give firms confidence that the United States will remain an attractive place to build their next facilities. Allowing the current eligibility window for projects to begin construction to close at the end of 2026 would remove an important incentive just as the United States has begun rebuilding its semiconductor manufacturing base.

Making the credit permanent would encourage companies to continue investing billions of dollars in U.S. semiconductor facilities rather than directing those investments abroad. The United States has already generated substantial momentum, with companies announcing more than $825.8 billion in semiconductor-related investments since 2020. Policymakers should build on that progress by making Section 48D permanent and ensuring that the United States remains one of the world’s most competitive locations for semiconductor manufacturing.