The CHIPS Act Tax Credit Expires at Year-End — and the Specialty Chemical Supply Chain Bet Has No Backstop Without It

The TSMC Phoenix Fabs Are Not in Danger — The Second-Tier Project Pipeline Is

The distinction that is getting lost in the coverage of the Section 48D expiration debate is which projects are at risk and which are not. The largest CHIPS Act investments — TSMC's $165 billion commitment to advanced manufacturing in Phoenix, the Intel fab investments in Ohio and Arizona, and the Samsung facility in Texas — are protected because their CHIPS Act grant agreements are signed, their construction timelines are established, and the political cost of disrupting them is too high for any administration to absorb. The projects at genuine risk are the second and third tier of the domestic semiconductor ecosystem: the advanced packaging facilities, the legacy chip manufacturing plants for automotive and defense applications, the specialty chemicals and materials suppliers building domestic production capacity specifically to serve the new US fabs, and the test and assembly operations that are necessary for a complete domestic supply chain but that lack the profile to survive a congressional debate on industrial policy merits alone. Section 48D's 25 percent credit is the difference between a viable and non-viable business case for most of these supporting projects, and its expiration without replacement would create a gap in the supply chain ecosystem surrounding the anchor fabs that TSMC and Intel are building — meaning the fabs themselves could be built while the domestic supply chain they were designed to reduce dependence on foreign suppliers for remains underdeveloped.

The specialty chemicals dimension is the least visible and most consequential aspect of this dynamic. Advanced semiconductor manufacturing requires hundreds of specialty process chemicals — photoresists, etchants, cleaning agents, dielectrics, and dopants — most of which are currently produced in Japan, South Korea, Taiwan, and Germany. The domestic supply chain for these materials barely exists, and the companies considering building US production capacity for semiconductor-grade specialty chemicals are making investment decisions in 2026 and 2027 that depend on both CHIPS Act demand signals and the Section 48D credit for their own manufacturing facilities. If Section 48D expires, the financial model for building US semiconductor chemical production fails even as the fab demand that would justify it comes online — a classic chicken-and-egg supply chain problem that the tax credit was specifically designed to break, and that its expiration would reassemble.

Congress Is Running Out of Time to Act, and the Market Knows It

The legislative window for extending Section 48D is narrowing in ways that the semiconductor industry's lobbying effort has been explicit about. The CHIPS Act tax credit authorization runs through December 31, 2026, and companies that do not complete construction and place facilities in service before that date cannot claim the credit. For a semiconductor fab with a multi-year construction timeline, projects that did not break ground by late 2024 or early 2025 face a genuine risk of being unable to complete construction within the credit window — which is precisely why the SIA has been pushing for an extension since 2025, before the expiration became imminent enough to generate mainstream political coverage. The STAR Act, introduced by a bipartisan group of senators specifically to extend and expand the Section 48D credit, is the legislative vehicle most likely to move if Congress acts, but it has not advanced past committee in an environment where fiscal hawks in both parties are scrutinizing the approximately $24.5 billion in projected federal revenue loss from the credit.

For companies in the semiconductor supply chain, the Section 48D uncertainty is already affecting investment decisions in ways that will be difficult to reverse if Congress eventually acts but acts late. Permitting processes for specialty chemical production facilities take eighteen to twenty-four months minimum; construction takes another two to three years. A company that was planning to make a final investment decision on a US semiconductor chemical facility in the second half of 2026, conditional on Section 48D extension, is now evaluating whether to proceed on the assumption that Congress will act or defer to a production timeline that assumes it will not. The semiconductor investment cycle is long enough that political uncertainty at this stage translates into missing the window for meaningful domestic supply chain development even if Congress eventually does the right thing.