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What the CHIPS Act means for Greater Washington – Washington Business Journal – The Business Journals

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Greater Washington might not be a manufacturing powerhouse, but the region’s leaders say it’s still poised to benefit significantly from a new federal law designed to reposition the U.S. as a global leader in semiconductor manufacturing.
The U.S. makes just 12% of the world’s semiconductors, or microchips, down from 37% in the early 1990s. Enter the CHIPS and Science Act that President Joe Biden signed into law in August. It devotes $52 billion to boost chip production in the U.S. and decrease reliance on the likes of Taiwan, South Korea, Japan and, particularly, China. And companies with sizable local footprints, from Quantum Computing Inc. to Micron Technology Inc., are already taking steps to capitalize on that bonanza.
But the legislation is not just about microchips. It’s also designed to spur innovation domestically by funneling roughly $170 billion to various federal agencies — many of which operate in our backyard — that long support the early-stage startups, clinical-stage biotechs, universities and other institutions conducting research and spinning out new technologies in our midst.
It’s that piece, say Washington-area leaders, that’s likely to have the biggest ripple effect on the region’s economy.
Exhibit A: The Alexandria-based National Science Foundation (NSF) alone is set to receive $81 billion to speed up development of technologies in areas such as quantum computing and artificial intelligence, support research around everything from clean water systems to behavioral health to cybersecurity, and fund STEM education and workforce growth. Companies here are well-positioned to compete for such funding and envision still more companies relocating to the area for proximity to the people determining how to dole out those dollars. It’s not unlike how defense and aerospace giants Raytheon Technologies Corp. and The Boeing Co. have shifted their headquarters here to gain access to Pentagon decision-makers, or how drug companies flock to Montgomery County’s biotech corridor to be near the Food and Drug Administration and National Institutes of Health.
“These are amazing sources of innovation and technology for product development, so they are big draws for companies that are coming to this area,” said outgoing Maryland Tech Council CEO Marty Rosendale. “And when you’re looking for these kinds of grants and you’re looking for this kind of support, it’s very helpful to be able to meet with executives of these organizations face to face. It’s a whole lot easier if you’re here in close proximity to their offices.”
To be sure, it’s too early to calculate the bill’s expected contribution to the local economy, or even if the region will benefit more than other tech hotspots such as San Francisco or Boston. But the D.C. region checks all of the boxes, according to Stephanie Landrum, president and CEO of the Alexandria Economic Development Partnership — highly educated workforce, abundance of high-tech companies and academic institutions that support research. And, she said, it has the added benefit of being home to the agencies set to receive the lion’s share of the funding.
“It commits an incredible amount of federal investment in fields that the U.S. desperately needs to stay competitive as a country, which are the same fields and industries that we, as a region, have been focusing on attracting and growing,” Landrum said. “We are already seeing short-term impacts and we expect to see a big local impact over the long term.”
All eyes on manufacturing
The “CHIPS,” which stands for Creating Helpful Incentives to Produce Semiconductors, in the legislation has captured the bulk of the media attention, and for good reason.
Microchips power everything from military weapons to medical devices, computers to cars, and the Covid-19 pandemic underscored the dangers of not strengthening the U.S. supply chain. Throughout the crisis, demand for consumer goods that use microchips far exceeded supply, as pandemic-era restrictions in East Asia, where roughly 75% of the world’s chips are made, crimped production.
Now, the CHIPS bill allocates $39 billion in incentives to encourage chip manufacturers to build or expand fabrication plants across the country, and another $13 billion for new research and development within semiconductor manufacturing.
Leesburg’s Quantum Computing (NASDAQ: QUBT) is among the local companies looking to take advantage of that opportunity. The publicly traded company, whose software simplifies coding and connects quantum computers through the cloud, plans to expand its chip development capacity with a new manufacturing and research center, while eyeing $30 million from the CHIPS bill to make it happen. The local company is now negotiating incentives offers with multiple states, CEO Robert Liscouski said in a statement earlier this month. “We believe the development of a commercially scalable quantum computing chip represents a massive opportunity, and one that QCI is ready to tackle.”
Idaho’s Micron Technology (NASDAQ: MU), a semiconductor manufacturer with a big Northern Virginia presence, had already planned to invest more than $40 billion of its own money to expand its U.S. manufacturing. Tax credits and grants from the federal government could conceivably allow it to increase capacity.
For now, Micron isn’t tipping its hand on whether that could include further expansion of its 750,000-square-foot Manassas facility at 9600 Godwin Drive, nor any potential plans to purchase another 18 acres next door. “That is an important part of our manufacturing footprint, supplying our long-lifecycle technologies that are used in automotive, networking and defense applications,” a Micron spokesperson said in an emailed statement about its Manassas site. “We recently completed a clean room expansion at this location, which has allowed us to implement more advanced technology for these markets.”
Local companies that serve manufacturers also see opportunity, as the bill supports investments in domestic manufacturing plants. That includes Derwood’s Xometry Inc. (NASDAQ: XMTR), whose platform connects suppliers of manufacturing services and buyers of manufactured parts.
“This could be a good thing for Xometry, and it could be a good thing for manufacturers here in the DMV area,” said co-founder and CEO Randy Altschuler. “Irrespective of where these plants are built, with our marketplace, they’ll be discoverable — they can be found by these companies that are building these large plants and trying to expand.”
And even if the region isn’t poised to become a chip manufacturing hub, increased production anywhere in the U.S. could be a boon for companies based here that need ready access to chips.
Anzu Partners, a venture capital firm with a D.C. office, expects the CHIPS bill to change the game for the industrial technology and life sciences companies in its portfolio, said Anzu Managing Partner Whitney Haring-Smith. As he sees it, access to domestic manufacturers closer to home leads to shorter wait times, improved efficiency and faster growth for local companies — to the benefit of the regional economy.
Among them is Maryland’s Zeteo Tech, whose technology screens for infectious diseases and biothreats, Haring-Smith said. “Enabling companies that are either national security-centric and need a U.S. supplier or are timeline-centric and therefore need an onshore, domestic supplier is quite helpful.”
Eventually, according to Halcyon Chief Investment Officer Dahna Goldstein, such companies that rely on chips “will have more options, more control, a greater ability to predict and manage their supply chain, and to manage their costs.”
The ‘and Science’ opportunity
But it’s the second component of the bill that is “potentially even more impactful” for the D.C. region, Anzu Partner Jimmy Kan said.
It includes $20 billion specifically for the NSF’s Directorate for Technology, Innovation and Partnerships, expected to eventually produce Small Business Innovation Research and Small Business Technology Transfer grants — and “really could drive and spawn a lot of new startups,” Kan said.
Those grants “will play a large role in the university setting and create more funding for R&D, scientific research and innovation,” said Rebecca Howick, director of operations for the Center for Innovation and Entrepreneurship in George Mason University’s School of Business. Those NSF dollars could also facilitate the development of tools that, for instance, could help automate and accelerate clinical research, “which would allow us and other industry leaders to address public health challenges more efficiently, quickly and effectively,” said Christine Dingivan, president and CEO of Rockville contract research firm Emmes, which works with government agencies and biopharma clients.
The bill’s acknowledgment of longstanding inequities in access to STEM education and funding, local leaders agree, is a big deal. Its emphasis on diversity and inclusion, and focus on expanding access to STEM education and training opportunities also holds potential advantages for D.C.-area organizations like Emmes, which has long supported such programs, including Falls Church nonprofit STEM for Her. In today’s tight labor market, Dingivan said growing the pipeline of talent is “more critical than ever to ensure that we can continue the important work we do advancing public health, as well as innovating for the future.”
Another expected benefit: The legislation provides billions in additional funding to the Department of Energy (DOE) Office of Science and the National Institute of Standards and Technology (NIST), which directly support D.C.-area technology and life sciences companies by creating new grant funding opportunities.
And that, in itself, can spark additional investment, said Sammy Popat, campus connector and interim director of the University of Maryland, College Park’s Mixed/Augmented/Virtual Reality Innovation Center. “This region is not built for manufacturing, especially for microchips, but that doesn’t mean there aren’t other tangential or peripheral opportunities.”
The case for quantum
One area of opportunity lies in quantum computing, an emerging field seen as critical both for consumer applications, as well as national security and defense — and highlighted as a priority for the authorized funding to the DOE, NSF and NIST.
The region is already gaining momentum in that space, thanks partially to schools like Virginia Tech, which is bringing a quantum lab to its innovation campus in Alexandria, and the University of Maryland, already one of the largest recipients of federal funding for quantum with the 2015 spinout of IonQ and the 2020 creation of the Mid-Atlantic Quantum Alliance.
That success in College Park has helped position Prince George’s County as an early leader in the field, while creating opportunities across Maryland and the region, Benjamin Wu, former CEO of the Montgomery County Economic Development Corp., said in a recent interview before stepping down from his post. “What we want to do is be able to characterize the region as a quantum epicenter for the country,” he said.
“We have the potential of inviting a company like IBM or Google or whomever is interested in that space to look at the Greater Washington area, and then we in Montgomery County can compete on our own merits,” said Wu, now special adviser to Maryland Gov. Larry Hogan. “In order to do that, we need to develop not just the intersections within our niche — for example, life sciences — but also, we need to develop a quantum-ready workforce.”
The region already has one of the largest concentrations of quantum engineers and computer scientists in the country. To capitalize on that momentum, Montgomery County is working with its public school system, as well as Montgomery College and Universities at Shady Grove, to fuel that talent pipeline as a draw for companies looking to locate here.
The legislation has also led to the launch of the NSF’s Regional Innovation Engines Program to stimulate the creation of innovation hubs in different metropolitan areas. The initiative will award grants — $1 million over two years or $160 million for up to a decade — to winning applicants to create regional engines around the country (think: tech in Silicon Valley or biotech in greater Boston).
D.C.-area organizations have been active in submitting applications for the grant funding, with nearly 40 from across the District, Maryland and Virginia among the roughly 700 nationwide, targeting everything from food insecurity to workforce development to clean energy. “This kind of funding supports that kind of work and creates some very good near-term opportunities for Maryland and for our businesses,” said Rosendale of the Maryland Tech Council, the lead organization on one of those applications.
The Penn West Equity and Innovation District, underway locally before the legislation went into effect, is another example of the type of engine this program would look to support. Still in its early stages, the partnership between George Washington University, the Golden Triangle Business Improvement District, D.C. government and Washington, D.C. Economic Partnership aims to draw tech startups to the city.
Above all, local leaders agree, the bill is valuable “for making sure that the academic and government funding for research actually gets out into the real world,” said Jim Chung, associate vice president for research in GWU’s Office of Innovation and Entrepreneurship. Basic research, whether for space programs or disease treatments, is currently “very difficult” to move forward fast, which has hindered the region from excelling in these areas, he said. “But now we’ve got much more well-defined infrastructure and channels for doing that.”
Just the beginning
Greater Washington’s economy won’t realize the legislation’s greatest potential benefits right away, as the federal agencies and laboratories set to receive funding still have to figure out how exactly they’ll put it to work over time.
Officials and executives say they’re all keeping a close eye on how it’s allocated, what doors could open as a result and how local tech startups can get their feet securely wedged in. And further strengthening the talent pool here will only put a higher premium on a region that already won the likes of Amazon.com Inc.’s HQ2 campus as a result of it.
“Government funding can create lots of opportunities for larger entities and corporations, but implementation plans need to ensure that it, in turn, also creates more well-paying jobs for people living within the DMV,” GMU’s Howick said.
Workforce development, therefore, will continue to be a need, “and the bill does provide for it,” Landrum said. “But at the same time, when historic innovation investment is coupled with historically low unemployment, we’re likely going to have to do more.”
The region already has infrastructure in place to make the moment count. The University of Maryland’s Discovery District, for one, has plans for several hundred thousand square feet of development in the coming years. And those buildings would aim to draw ventures initially funded by the NSF through faculty research on the College Park campus.
“This is exactly why we built out our research park,” said Popat, also Discovery District manager at the University of Maryland, College Park. “Along these lines is where change is going to happen and innovation’s going to come.” 
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