Commerce Department Halts $285 Million CHIPS Act Funding for Semiconductor Digital Twin Institute
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Teh U.S. Department of Commerce has informed the 121 members of the SMART USA Institute, a center established under the CHIPS and Science Act, that its $285 million, five-year contract will be terminated, raising concerns about the management’s commitment to bolstering domestic semiconductor research and advancement. The move marks the second instance of a CHIPS Act-related institution being defunded since January 2025, signaling a potential shift in strategy for the landmark legislation.
SMART USA’s Mission and Structure
According to its website, the SMART USA Institute – which stands for “semiconductor manufacturing and advanced research with twins” – aimed to revolutionize chip manufacturing through the creation of “virtual manufacturing replicas,” also known as digital twins. These digital models were projected to reduce development and manufacturing costs by over 35 percent, accelerate development timelines by 30 percent, and improve manufacturing yields by 20 percent. The institute was managed by the Semiconductor Research Corporation (SRC), a non-profit consortium, and funded through cooperative agreements with the Department of Commerce’s National Institute of Standards and Technology (NIST).
Abrupt Termination and Justification
The decision to terminate the contract was communicated to SMART USA members via email on December 16th, 2024. The decision was made “for convenience,” a clause common in federal contracts that allows the government to unilaterally withdraw from an agreement. Requests for comment from the Commerce Department went unanswered as of press time.
Despite acknowledging that SMART USA had met its performance targets and built an effective association,Todd Younkin,the institute’s executive director and CEO of SRC,wrote in the email that the administration had chosen to redirect its support. “Although DOC acknowledged that we built an effective organization and met all performance targets, the administration has chosen not to support R&D and workforce development in this direction,” Younkin stated. A Q&A webinar is scheduled for Wednesday, December 17th, to address member concerns.
Concerns from Congress and industry
The defunding of SMART USA has sparked criticism from members of Congress. In a December 17th letter to Craig Burkhardt, Acting Undersecretary of Commerce for standards and technology, Representatives Zoe Lofgren and Haley Stevens expressed concern over the Department’s recent decisions to halt or delay semiconductor R&D programs. They warned that these actions could damage the reputation of the national Institute of Science and Technology (NIST), a key agency implementing the CHIPS Act.
“NIST has a reputation as a neutral and steadfast partner that can work with any industry and academic organization,” Lofgren and Stevens wrote. “This reputation is very much at risk. Few companies would willingly seek partnership with an organization that cancels its obligation on a whim.” The lawmakers also criticized NIST’s recent shift towards a venture capital-style funding model,arguing it deviates from the CHIPS Act’s original intent.
Ripple Effects and Future of SRC
The termination is already impacting ongoing research projects. One academic participant, who wished to remain anonymous, described how a three-year, $450,000 grant from SRC’s Global Research Collaboration program was canceled in early 2025 and the researcher was encouraged to reapply through SMART USA. Though, securing sufficient funding commitments from SMART USA members proved impossible. “We were not able to secure enough funding commitments from SMART USA members to even submit,” the scientist said, noting a lack of engagement from SRC member companies within the new program.
Despite the setback, SRC intends to continue its research funding through other programs. David N. Henshall, chief operations officer for SMART USA and senior vice-president for SRC, stated that the termination “is not a reflection of the notable work we were doing.” Younkin echoed this sentiment, emphasizing SRC’s long-term commitment to the semiconductor community.”We have united the semiconductor community for decades, and will continue to do so,” he said.
The situation with SMART USA mirrors a previous decision to withdraw $7.4 billion from Natcast, the public-private partnership established to run the National Semiconductor Technology Center. Though,the handling of the two cases differs considerably. While the Commerce Department publicly questioned the integrity of Natcast’s leadership, no such statements have been made regarding SMART USA, leaving many in the industry to speculate about the true motivations behind the funding cuts.
