Build semiconductor capacity with policy-grade compliance

Executive overview

The semiconductor industry sits at the centre of national security, economic competitiveness, and digital transformation. The U.S. CHIPS and Science Act of 2022 authorises $52.7 billion in incentives, including $39 billion for manufacturing grants, $13.2 billion for R&D and workforce programmes, and a 25 percent advanced manufacturing investment tax credit (Section 48D).^{Pub. L. 117-167} The EU Chips Act, comprising Regulation (EU) 2023/1781 and a Council Regulation establishing the Chips Joint Undertaking, mobilises €43 billion in public and private investment, introduces monitoring obligations, and designates “Integrated Production Facilities” and “Open EU Foundries.”^{Regulation (EU) 2023/1781} The Defense Production Act (DPA) empowers the U.S. government to prioritise contracts and allocate materials for national defence; Title III funding is increasingly directed at advanced packaging, substrates, and critical materials.^{50 U.S.C. §§ 4501–4568}

Capturing these incentives demands rigorous planning, cross-functional governance, and evidence-based reporting. Funding agreements impose conditions: guardrails restricting expansion in countries of concern, profit-sharing above agreed thresholds, child care obligations, cybersecurity controls, and supply chain traceability. EU programmes require compliance with state aid rules, security of supply commitments, and data-sharing with the Chips Alert System. This guide provides the operating model to meet those conditions while keeping fabs and advanced packaging lines on schedule.

We focus on aligning capital planning, compliance, and policy engagement. Use this guide with Zeph Tech’s compliance operations to handle incident response and edge resilience for distributed compute scenarios.

Legislative baseline

CHIPS and Science Act of 2022. Division A authorises incentives for manufacturing and R&D; Subtitle A establishes the CHIPS for America Fund, while Subtitle B creates the National Semiconductor Technology Center (NSTC) and National Advanced Packaging Manufacturing Program (NAPMP). Section 102(a) mandates prioritising projects that strengthen supply chain resilience and create secure facilities. Section 103 outlines guardrails prohibiting recipients from materially expanding semiconductor manufacturing in countries of concern for ten years. Section 107 establishes preference for applicants with workforce development and education partnerships. The Department of Commerce’s September 2023 Notice of Funding Opportunity (NOFO) sets detailed application requirements, including commercial viability, financial structure, workforce plans, and compliance programmes.^{88 Fed. Reg. 65652 (Sept. 25, 2023)}

The Internal Revenue Service’s guidance on the Section 48D tax credit requires taxpayers to file pre-filing registration, maintain property records, and document placed-in-service dates. Projects receiving direct funding cannot claim the credit for the same qualified investments, necessitating coordination between tax and grant teams. The Advanced Manufacturing Investment Credit is transferable, enabling monetisation strategies but demanding robust substantiation and compliance with recapture rules if guardrails are breached.

EU Chips Act. Regulation (EU) 2023/1781 establishes a three-pillar strategy: the Chips for Europe Initiative, a framework for security of supply, and a monitoring and crisis response mechanism. Articles 12–24 create the Chips Joint Undertaking to finance R&D and pilot lines. Article 26 introduces a European Semiconductor Board for coordination. Articles 27–36 impose monitoring and crisis response obligations, including mandatory information requests during significant supply disruptions. The act emphasises “first-of-a-kind” facilities and requires integrated production facilities to demonstrate long-term viability, contribution to EU competitiveness, and compliance with security measures.

Defense Production Act Title III. Title III authorises the President to provide financial incentives—loans, loan guarantees, purchase commitments, and direct investments—to expand production capacity for materials and technologies essential to national defence. Recent determinations cover advanced substrates, compound semiconductors, and critical minerals. Section 4533 allows purchase commitments to sustain capability; Section 4531 provides for direct financial assistance. Compliance requires meeting cost accounting standards, reporting on project milestones, and adhering to Buy American requirements.

Title III agreements typically include priority rating clauses under the Defense Priorities and Allocations System (DPAS), obligating recipients to accept and prioritise rated orders. Organisations must adjust production planning systems to recognise DO and DX ratings, communicate impacts to suppliers, and maintain records for Department of Defense audits.

Supporting statutes. The Build America, Buy America Act (Division G of the Infrastructure Investment and Jobs Act) imposes domestic content requirements on federally funded infrastructure projects.^{Pub. L. 116-92} The National Defense Authorization Acts for FY 2024 and FY 2025 introduce additional reporting and cybersecurity expectations for CHIPS recipients. EU state aid frameworks, such as the Temporary Crisis and Transition Framework, govern public funding approvals.

International coordination. The U.S., EU, Japan, and South Korea coordinate through fora like the U.S.-EU Trade and Technology Council (TTC) Working Group 3, the Quad Critical and Emerging Technology Working Group, and the Semiconductor Supply Chain Partnership. Monitoring these channels provides foresight into subsidy alignment, export controls, and joint research priorities.

Governance and programme design

Programme office. Establish a Semiconductor Programme Office (SPO) led by a Programme Executive reporting to the CFO and COO. The SPO integrates finance, engineering, supply chain, compliance, policy, and workforce teams. Create workstreams for funding applications, compliance, construction delivery, technology ramp, and ecosystem partnerships.

Steering committee. Convene a steering committee with C-suite sponsors, general counsel, chief sustainability officer, and heads of manufacturing, R&D, and HR. Meet monthly to review funding progress, risk registers, and milestones. Align decisions with board oversight, referencing Zeph Tech’s board oversight guide.

Risk management. Maintain a risk register covering construction delays, cost overruns, supply shortages, compliance breaches, export control changes, workforce gaps, and geopolitical shocks. Map risks to mitigation actions, owners, and contingency budgets. Integrate with enterprise GRC platforms and update quarterly.

Policy integration. Assign policy liaisons to monitor legislative developments, coordinate comment submissions, and manage relationships with government stakeholders. Document meetings, commitments, and follow-up actions. Ensure messaging aligns with compliance positions and funding applications.

Documentation. Implement controlled document repositories for funding applications, contracts, compliance reports, environmental impact assessments, and design packages. Use version control, access permissions, and retention policies aligned with funding agreements (often 10–12 years).

Funding strategy

Eligibility assessment. Analyse programme eligibility criteria early. For CHIPS grants, evaluate project stage (leading-edge logic, memory, advanced packaging), capital expenditure, technology readiness, and workforce commitments. For EU Chips, assess whether projects qualify as Integrated Production Facilities, Open EU Foundries, or pilot lines. Map eligibility against corporate strategy and risk appetite.

Application roadmap. Build a phased plan: concept paper, pre-application, full application, due diligence, award negotiation, and post-award compliance. Assign leads, deadlines, and required artefacts (financial models, business plans, ESG metrics, supply chain mapping, workforce plans, cybersecurity programmes). Use stage gates with executive sign-off.

Due diligence readiness. Assemble virtual data rooms with audited financial statements, environmental assessments, zoning approvals, community benefit agreements, and detailed project schedules. Prepare management for diligence interviews focusing on technology differentiation, operational readiness, and compliance culture.

Financial modelling. Develop detailed financial models capturing capital costs, operating expenses, incentive structures, tax credits (Section 48D), and potential clawbacks. Incorporate profit-sharing scenarios triggered by excess cash flows. Stress-test assumptions under varying subsidy levels, demand forecasts, and cost inflation. Provide outputs to finance and treasury for capital allocation decisions.

Stacking incentives. Combine federal, state, and local incentives with private financing. For U.S. projects, coordinate CHIPS grants with state tax abatements, utility rate incentives, and workforce grants. For EU projects, align EU-level funding with national state aid packages. Ensure compliance with subsidy caps and reporting obligations.

Guardrails compliance. Document strategies to comply with guardrails, including commitments not to expand advanced semiconductor capacity in countries of concern, notification processes for technology licensing, and monitoring for joint ventures abroad. Maintain board-level oversight and integrate with export control programmes.

Capital deployment. Align funding tranches with project milestones. Create cash flow schedules that account for reimbursement-based funding. Implement cost control frameworks with thresholds for change orders requiring funder notification. Integrate with procurement and construction management systems.

Performance bonds and guarantees. Evaluate bonding requirements for construction and equipment installation. Coordinate with financial institutions to provide letters of credit or performance guarantees demanded by funders. Monitor covenant compliance and renewal timelines.

Compliance and reporting

Agreement obligations. Funding agreements typically require quarterly and annual reporting on construction progress, financial status, job creation, workforce initiatives, child care provision, environmental compliance, and cybersecurity posture. Build a reporting calendar and assign owners. Create templates aligned with Department of Commerce, EU Chips Joint Undertaking, and DPA Title III reporting formats.

Internal controls. Implement internal controls for cost tracking, timekeeping, procurement approvals, and change management. Align with Sarbanes-Oxley and internal audit frameworks. Use digital workflows to capture supporting documentation and approvals. Conduct periodic self-audits to ensure readiness for government reviews.

Data governance. Maintain single sources of truth for cost data, workforce metrics, and ESG indicators. Implement data quality checks and reconciliation routines. Provide secure access for auditors and regulators while enforcing least-privilege principles.

Cybersecurity. CHIPS recipients must implement NIST SP 800-171 controls when handling controlled unclassified information (CUI) and may be subject to upcoming cybersecurity requirements. EU programmes expect adherence to EU cybersecurity frameworks. Conduct gap assessments, implement multi-factor authentication, monitor supply chain cybersecurity, and document incident response plans aligned with cybersecurity operations.

Environmental, health, and safety (EHS). Funding agreements often reference NEPA (National Environmental Policy Act) reviews, state environmental permits, and EU environmental impact assessments. Maintain EHS management systems with monitoring for air emissions, water usage, waste management, and occupational safety. Report metrics to funders and regulators.

Child care and workforce commitments. CHIPS NOFO requires recipients requesting more than $150 million to provide access to affordable child care. Develop child care plans (on-site facilities, subsidies, partnerships) with measurable metrics. Track workforce training hours, apprenticeships, diversity goals, and community investments.

Audit readiness. Prepare for inspector general audits or European Commission reviews. Maintain evidence binders covering financial transactions, procurement, compliance controls, and performance metrics. Conduct mock audits with internal audit or third parties. Document remediation of findings.

Whistleblower programmes. Reinforce whistleblower channels tailored to funding agreements, ensuring staff can report misuse of funds, safety concerns, or compliance breaches anonymously. Track investigations, remediation, and reporting obligations.

Supply chain and sourcing

Supplier mapping. Build a multi-tier map of equipment, materials, and service providers. Identify critical suppliers (lithography, deposition, metrology, chemicals, gases) and capture location, capacity, lead times, and risk indicators. Integrate with export control and sanctions compliance described in the export controls guide.

Localization strategy. Evaluate opportunities to localise production of critical inputs—photoresists, wafers, substrates, gases—to meet domestic content requirements. Partner with suppliers to develop regional capacity. Consider joint ventures or minority investments supported by DPA Title III or EU Chips funding.

Resilience planning. Develop contingency plans for disruptions (natural disasters, geopolitical events, equipment failures). Maintain safety stock, dual-source critical materials, and design modular production lines. Use scenario planning tools to assess impact of export control tightening or sanctions. Align with resilience strategies.

Sustainable sourcing. Integrate sustainability criteria—energy intensity, water stewardship, waste reduction—into supplier evaluations. Align with EU Corporate Sustainability Reporting Directive (CSRD) and SEC climate disclosure expectations. Collect supplier data and incorporate into ESG reporting.

Logistics. Coordinate inbound and outbound logistics with export compliance. Secure reliable transportation for oversized equipment (air, sea, road). Plan for customs clearance, import duties, and bonded storage. Implement track-and-trace systems with IoT sensors to monitor shipments.

Permitting coordination. Work with local and national authorities to expedite permits for construction, environmental discharges, and hazardous materials storage. Maintain permit matrices with renewal dates and compliance obligations. Align with community engagement strategies to address public concerns.

Quality collaboration. Establish joint quality programmes with suppliers, including statistical process control, failure analysis, and continuous improvement. Share metrology data securely. Document outcomes for funder reports and customer audits.

Workforce and talent

Talent pipeline. Partner with universities, community colleges, and vocational programmes to build curricula aligned with semiconductor manufacturing, advanced packaging, and equipment maintenance. Leverage CHIPS-funded workforce grants, NSTC training modules, and EU Chips competence centres.

Apprenticeships. Establish registered apprenticeships covering cleanroom operations, maintenance, and process engineering. Track completion rates, certifications, and career progression. Report to funding agencies and labour departments.

Child care implementation. Deliver child care commitments via on-site centres, consortium models, or subsidies. Track utilisation, affordability, and employee satisfaction. Integrate with diversity and inclusion metrics.

Immigration and mobility. Coordinate with immigration counsel to secure visas for specialised talent (O-1, H-1B, L-1, EU Blue Card). Align with export control deemed export requirements. Document compliance and retention strategies.

Upskilling. Implement continuous learning programmes (process control, data analytics, safety). Use digital learning platforms with micro-credentials. Track skill acquisition and tie to performance management.

Community engagement. Invest in K-12 STEM outreach, scholarships, and local infrastructure improvements. Document economic impact for public reporting.

Technology and R&D

R&D partnerships. Engage with the NSTC, NAPMP, and EU Chips pilot lines for joint research on advanced nodes, heterogeneous integration, and materials. Secure IP agreements, data-sharing protocols, and governance structures.

Advanced packaging. Prioritise R&D on 2.5D/3D integration, chiplets, and high-bandwidth memory packaging. Align with Title III priorities and EU R&D calls. Develop roadmaps that integrate substrate innovation, thermal management, and testing automation.

Process innovation. Deploy Industry 4.0 technologies—digital twins, AI-driven process control, predictive maintenance—to improve yield and reduce downtime. Document productivity gains for funding reports. Link with cloud observability for monitoring.

Cyber-physical security. Implement zero-trust architectures, OT security controls, and hardware security modules. Align with NIST SP 800-82 and EU NIS2 Directive obligations. Conduct penetration tests and red-team exercises. Integrate with cybersecurity operations.

IP management. Establish IP governance covering patents, trade secrets, and data sharing. Ensure funding agreements’ IP clauses are understood (e.g., U.S. government march-in rights, EU access rights). Maintain IP registers and compliance with export controls.

Sustainability innovation. Invest in energy-efficient manufacturing (renewable power purchase agreements, waste heat recovery), water recycling, and circular economy initiatives for solvents and chemicals. Report outcomes to funders and sustainability frameworks.

Metrics and assurance

Performance metrics.

• Capital efficiency. Variance between actual and planned capital expenditure per phase.
• Schedule adherence. Percentage of milestones delivered on time (site readiness, tool installation, qualification).
• Yield ramp. Time to reach target yield for new process nodes or packaging lines.
• Job creation. Number of direct and indirect jobs created versus commitments.
• Workforce development. Training hours delivered, apprenticeship completions, and diversity metrics.
• Supply resilience. Percentage of critical materials sourced domestically or from allied partners.
• Compliance health. Audit findings, remediation status, and guardrail compliance incidents.

Dashboards. Build integrated dashboards showing funding status, capital deployment, operational readiness, workforce metrics, and compliance KPIs. Provide drill-down views for executives and board committees.

Reporting cadence. Align internal reporting with funder timelines (quarterly reports, annual compliance certifications, milestone submissions). Prepare board updates ahead of public announcements.

Independent assurance. Conduct internal audits and engage third-party assessors to review financial controls, compliance with guardrails, cybersecurity, and environmental metrics. Document findings and remediation. Share summaries with funders where required.

Scenario analytics. Model demand, pricing, and subsidy sensitivity. Use scenario planning to evaluate impacts of export control changes, demand shocks, or supply disruptions. Share insights with finance and policy teams.

Roadmap

0–6 months. Finalise funding applications, secure board approvals, and launch site preparation. Establish child care and workforce partnership plans. Implement compliance infrastructure (policies, controls, reporting templates).

6–18 months. Receive conditional awards, negotiate agreements, and begin major construction. Ramp procurement, execute supplier localisation projects, and expand workforce programmes. Launch NSTC and EU pilot line collaborations.

18–36 months. Install tools, commence qualification, and transition to high-volume manufacturing. Execute reporting obligations, respond to audits, and refine export control compliance. Expand R&D partnerships and ecosystem development.

Beyond 36 months. Achieve full production, evaluate additional expansion, and reinvest profits into innovation. Monitor policy developments (future CHIPS appropriations, EU Chips Act revisions, DPA allocations). Update industrial strategy accordingly.

Calendar integration. Maintain a master calendar covering funding submission deadlines, reporting, construction milestones, workforce events, and policy engagements. Sync with policy calendar updates.

Appendix: Artefacts and references

Template suite. Provide funding application templates, compliance report formats, guardrail monitoring checklists, child care plans, and supplier localisation frameworks.

Reference library. Store legislative texts, NOFO guidance, EU Chips implementing acts, DPA Title III determinations, and policy briefs. Tag by topic and jurisdiction.

Stakeholder map. Document government contacts (Commerce, NSTC, EU Chips Joint Undertaking, state agencies), industry associations, academic partners, and community organisations. Track engagement history and action items.

Lessons learned. Capture insights from prior projects—permitting timelines, contractor performance, community response—and feed into continuous improvement. Share with cross-functional teams.

Continuous improvement. Schedule quarterly retrospectives on funding execution, compliance, and operations. Update risk registers, KPIs, and strategies. Present results to the steering committee and board.