- The U.S. government recently announced the extension of the 25% tax credit in the CHIPS Act to wafer manufacturing, including photovoltaic cells used in solar panels.
- This decision is part of the CHIPS and Science Act, aimed at incentivizing domestic semiconductor and solar panel production, thereby reducing reliance on overseas supply chains.
What happened
The U.S. government recently announced an extension of the 25% tax credit in the CHIPS Act. This extension now covers wafer manufacturing, including photovoltaic cells used in solar panels. This decision is part of the CHIPS and Science Act. It aims to encourage domestic production of semiconductors and solar components. The goal is to reduce dependence on overseas supply chains. The government introduced this new regulation more than a year after the initial proposed rules. This change will let more companies qualify for tax reductions.
According to the rules proposed last year, companies can get tax credits if they build semiconductor or equipment manufacturing facilities in the United States. This applies to facilities built after August 9, 2022. However, these rules come with a condition. If a company expands its semiconductor manufacturing in a targeted country, mainly China, it will lose the tax credits. The IRS will take back any credits already given.
In addition, Infinera recently received up to $93 million from the CHIPS Act subsidies. This money will help the company expand and modernize its chip factories. The funds will support facilities in California and Pennsylvania. This funding is expected to increase the company’s domestic manufacturing capacity tenfold while creating approximately 500 manufacturing jobs and 1,200 construction jobs.
Also read: U.S. awards HP $50M to advance semiconductor tech projects
Also read: Biden administration finalises first chips act award to Polar Semiconductor
Why it is important
The expansion of this tax credit is a significant boon for wafer and solar panel manufacturers. It will lower the cost of establishing new manufacturing facilities in the United States. This helps promote the growth of the U.S. manufacturing industry. It also supports job creation and makes the country’s economy more competitive. The implementation of these measures demonstrates the U.S. government’s determination to strengthen the domestic semiconductor and solar industries. By providing tax credits and subsidy funds, the U.S. is promoting the growth of these key sectors to ensure the country’s technological leadership and supply chain security in the global market. These investments will also help drive innovation, improve energy efficiency, and support the transition to a greener and more sustainable economy.
