Governments have always paid for factories. Hamilton argued for bounties on manufactures, wartime governments built whole plants, and US states have competed with tax abatements for car plants since the 1980s. What changed in 2022 was the scale and the instruments. The CHIPS and Science Act (signed 9 Aug 2022, reported) set aside $39bn for chip-manufacturing incentives (up to $6bn of it usable for loans and loan guarantees) and $11bn for R&D (law-firm summaries; GAO confirms the $11bn R&D appropriation). The Inflation Reduction Act (16 Aug 2022) created the 45X per-unit production credit for clean-energy components, transferable for cash. The 48D investment credit for chip fabs was then raised from 25% to 35% by the 4 Jul 2025 budget law, for property placed in service after 2025, with construction still required to begin by 31 Dec 2026 (BDO, Baker Tilly, Holland & Knight alerts, reported). Then the instruments changed again. In 2025 the administration renegotiated CHIPS awards it called "overly generous". On 22 Aug 2025 it converted Intel's grants into a ~9.9% equity stake (433.3m shares at $20.47, ≈ $8.9bn). It took a golden share in U.S. Steel (Jun 2025) and convertible preferred stock in MP Materials (Jul 2025, ~15% as converted, with a $110/kg price floor). GAO reported on 6 Aug 2026 that Commerce had cancelled awards worth ~$7.8bn of the $11bn R&D appropriation and amended existing incentive awards for 14 companies. Meanwhile US manufacturing construction spending fell from a revised record of ~$249.8bn at an annual rate in Aug 2024 to ~$170.7bn in Aug 2026, about a third lower (Census via FRED, reported). This section explains why governments pay for factories, how each instrument works and what it is worth to the company, the CHIPS awards and their renegotiation, 45X and 48D after 2025, state packages and their clawbacks, equity stakes and golden shares, and Europe's and Asia's programmes. A companion worked example compares a grant, a transferable tax credit and an equity-for-grant swap from the existing shareholders' side.
What the study covers
- 1Overview: public money is a factor input with strings
- 2The instruments and what each is worth
- 3The CHIPS Act: awards, milestones and disbursement
- 4The tax code: 45X and 48D after the 4 Jul 2025 law
- 5Loans, states and clawbacks
- 6Equity stakes, golden shares and price floors
- 7Europe: the Chips Act and the limits of subsidy
- 8China, Japan, Korea and India
- 9The worked example in brief
- 10How to read industrial-policy claims
- 11Key numbers
- 12Landmark companies and cases
- 13Pitfalls
- 14How an expert thinks about it
- 15Glossary
Technical exhibits
Worked examples, checklists and case studies included with this study.
Grant Tax Credit and Equity Swap Shareholder Value Worked Example
Stylized US chipmaker with 1bn shares at $25: a $3bn milestone grant (+$2.58 a share if paid), a 35% investment credit sold at 95¢ (+$2.29), and the same $3bn converted into shares at $20 (13.0% stake, value per share falls to $24.35). When the swap beats the grant (only if the grant was likely to be cancelled and the fallback is a distressed raise), already-paid money, strings and upside (computed in Python)
Companies in this study
- Intel Foundry
- TSMC Arizona
- Samsung Electronics
- Texas Instruments
- GlobalFoundries
- Wolfspeed
- Applied Materials
- U.S. Steel
- Nippon Steel
- Ford Motor
- General Motors
- Hyundai Motor Group
- Panasonic
- Lordstown Motors
- Ola Electric. For the IRA's energy credits and the 2025 rollback see Energy 18 Policy and Regulation; for chip demand, design and export controls see AI 01 Semiconductors and AI Chips and AI 20 Geopolitics and Export Controls; for the government stake from Intel's side see AI: Intel, and for TSMC and Micron see AI: TSMC and AI: Micron; for 45X credit sales see Energy: First Solar; for Wisconsin see Supply chain: Foxconn's Wisconsin promise and retreat.