New U.S. Tax Credit Reshapes Semiconductor Investment & Manufacturing Landscape

The passage of the One Big Beautiful Bill Act marks a significant tax policy shift for the U.S. semiconductor industry. By raising the AMIC from 25 % to 35 %, Congress has strengthened the financial incentive for domestic capital investment in fabs, equipment, and manufacturing plants. However, because eligibility only applies to projects with construction beginning by December 31, 2026, there is a compressed window for firms to plan and execute qualifying investments.

The restoration of full R&D deductibility and the modified foreign‐derived intangible income (FDII) deduction alter long-standing cost structures for semiconductor firms, especially those with large design and IP components. These changes reduce operational taxes and may tilt the balance toward vertically integrated fabrication/design positions domestically.

Despite the enhanced credit, practical challenges remain. Scaling fabs is capital intensive, with long lead times, supply chain constraints (materials, workforce, utilities), and regulatory hurdles. Firms that cannot break ground by the end of 2026 may lose access, unless future legislation extends or further modifies the credit. Moreover, while the SIA projects job and capacity gains through 2032, other factors—global competition, input costs, geopolitical risk—could moderate outcomes.

Strategic implications include a potential acceleration of foreign direct investment (FDI) into U.S. production, especially from firms that were already planning expansion. Semiconductor supply chain actors—materials suppliers, equipment vendors—stand to benefit if legislation like the SEMI Investment Act passes, which would extend and expand credit eligibility to critical materials suppliers through 2031. There is also a rising urgency for policy clarity and certainty, as firms must allocate capital now to qualify.

Open questions persist: Will Congress further extend the eligibility period for AMIC beyond 2026? How will states’ tax incentives and local infrastructure play into siting decisions? Can U.S. semiconductor manufacturing scale fast enough to meet projected 2030 markets for advanced logic and memory chips? And how will input costs like labor, energy, and access to rare materials affect effective returns on investment?