House Lawmakers Take Important Step to Secure U.S. Semiconductor Design Leadership

House Lawmakers Take Important Step to Secure U.S. Semiconductor Design Leadership

Thursday, Aug 01, 2024, 11:15am

by Molly O'Leary, Director of Government Affairs

by Zach Isakowitz, Director of Government Affairs

Bipartisan members of the House of Representatives this week moved to bolster U.S. leadership and global competitiveness in semiconductor design by introducing the Semiconductor Technology Advancement and Research (STAR) Act of 2024. The legislation aims to incentivize U.S. chip design by providing a 25% investment tax credit for design activities conducted in the U.S.

Reps. Blake Moore (R-UT), Michael McCaul (R-TX), Doris Matsui (D-CA.), Suzan DelBene (D-WA), John Moolenaar (R-MI), Raja Krishnamoorthi (D-IL), Ro Khanna (D-CA), Joe Morelle (D-NY), and Claudia Tenney (R-NY) introduced this important bill, which will help to support advances in chip design and the semiconductor-enabled technologies that drive U.S. economic and technology leadership.

Semiconductor devices power today's economy, from AI and mobile devices to data centers, medical equipment, energy technologies, and electric vehicles. Chip design drives the functionality and innovation of those technologies by enabling chips to receive, transmit, process, and store ever-increasing amounts of data for today's digital world. Leadership in chip design also advances innovations in cybersecurity, which mitigates the risk of malicious tampering.

The process of designing the next generation of semiconductors is highly complex, interdisciplinary, and requires years of R&D, thousands of engineers, and hundreds of millions-or even billions-of dollars of investment. While U.S. companies are the longstanding leaders in chip design, global competitors continue to enact targeted incentives to attract chip design and challenge U.S. design leadership. Nations such as Korea and India offer a 50% tax credit for chip design, and China offers a 220% super deduction for semiconductor R&D. In contrast, the U.S. has no targeted incentive for chip design and requires businesses to amortize domestic R&D expenditures over five years. Without action, the U.S. risks losing the economic and national security benefits of having the technological edge and being the "first mover."

Understanding the strategic importance of leadership in the semiconductor industry, Congress in 2022 enacted the bipartisan CHIPS and Science Act, including a 25% investment tax credit to incentivize the expansion of the semiconductor ecosystem in the United States. The existing credit is vital for driving increased investments in key parts of the semiconductor supply chain, thereby strengthening the U.S. economy and national security. This credit is, however, limited to investments in manufacturing of semiconductors and semiconductor manufacturing equipment, and excludes critical activities in the semiconductor value chain, such as design. The legislation introduced this week broadens the scope of the credit to cover chip design, recognizing semiconductor design is integral to the long-term goals of U.S. economic growth, strengthened national security, and technology leadership.

At a time where the semiconductor industry is making historic investments in domestic chip production and supply chain resiliency, passing the legislation introduced this week will help continue this momentum and spur future innovation. SIA supports the STAR Act of 2024 and urges Congress to enact this critical legislation so the U.S. remains a competitive destination for critical design activities.

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