The Biden administration on Tuesday set out the rules for semiconductor companies that want a bite of the billions in financing from the U.S. CHIPS and Science Act. Here’s what you need to know about where Canada could fit in:

The prize: The U.S. Commerce Department has US$38.2 billion in direct funding to spend via grants and other subsidies, and can issue or underwrite another US$75 billion in loans. Federal financing is capped at 35 per cent of a project’s capital costs, typically topping out at US$3 billion.

The tech: Washington wants domestic fabs—the sector shorthand for semiconductor plants—to produce the newest logic and memory chips, as well as to increase local output of currently widespread components. And the administration is looking to back facilities that will do advanced packaging, a late-stage step in semiconductor production.

The Canada angle, manufacturing edition: The administration is pledging to bring allies in on its plan, including by sharing market data and coordinating incentives. It sees a particular role for friendly nations in the supply chain for regular chips. The department is already working with “countries in the Americas and those participating in the Indo-Pacific Economic Framework for Prosperity to ensure the adequacy of conventional packaging capacity outside countries of concern.”

That’s exactly the specialty Canada claims. Innovation Minister François-Philippe Champagne regularly talks up IBM’s packaging and testing facility in Bromont, Que.; it’s one end of a semiconductor corridor—akin to the Detroit-Windsor auto link—that the Liberal government plans to pitch to U.S. President Joe Biden when he comes north next month. 

The Canada angle, financing edition: The department insists public dollars aren’t meant to take the place of private capital in projects, but instead bring it in. And it’s urging firms to look beyond their own balance sheets for cash, including from investors “that may not typically participate in the space, such as private debt and infrastructure funds.” 

That could be a klaxon for Canadian money managers. In August 2022, Toronto-based Brookfield Infrastructure said it would put up US$15 billion for Intel’s new Chandler, Ariz., chip campus, taking a 49 per cent stake in the project. (Champagne has said he called Brookfield CEO Bruce Flatt after that announcement to suggest a similar arrangement for the EV battery plants he’s trying to land here).

The strings: Companies that take the department’s cash can’t expand production in “countries of concern” for 10 years. Read: China, even though the administration didn’t directly cite it. Firms that get over US$150 million in subsidies—a bar that’s not as high as it may seem, considering fabs typically cost billions—will have additional requirements. If their returns from the new plants exceed agreed-upon thresholds, they’ll have to cut the government in on the profits.