Beneath the Surface of the CHIPS Act

A proposed Texas hub signals a broader US push to secure rare earths at the root of semiconductor supply chains

26 Feb 2026

The US Department of Commerce has proposed up to $277mn in direct funding and as much as $1.3bn in potential loans for a rare earth and magnet facility in Texas, signalling a possible expansion of the CHIPS Act into upstream materials.

The non-binding letter of intent, awarded to USA Rare Earth, remains subject to customary approvals and financing conditions. If finalised, it would support a domestic operation spanning mining, processing and magnet production at a single site.

The move suggests Washington is looking beyond semiconductor fabrication plants to the raw materials that underpin chip production. Rare earth elements are used in high-performance magnets found in chipmaking equipment, electric vehicles, defence systems and data centres.

Global supply of rare earths and processing capacity is heavily concentrated overseas, exposing manufacturers to geopolitical risk and potential disruption. US officials have increasingly framed supply chain resilience as central to industrial policy and national security.

Commerce officials describe the proposed investment as part of a broader effort to strengthen competitiveness. Industry analysts say it could also shape how compliance with CHIPS Act funding is interpreted. Companies seeking federal support for semiconductor projects may face greater scrutiny of sourcing strategies and supply chain transparency.

The Texas project aims to create a traceable domestic pipeline for critical materials. Commercial production timelines, including a projected start of mining operations later this decade, depend on project completion, environmental permitting and access to capital.

Significant challenges remain. Rare earth processing is capital intensive and carries environmental risks. Established producers abroad benefit from scale and lower costs, making it difficult for new entrants to compete without sustained policy backing.

Even so, the proposal underlines a shift in US semiconductor strategy. As competition in advanced chips intensifies, policymakers are placing greater emphasis on securing inputs as well as manufacturing capacity. Whether or not the Texas project proceeds as planned, the direction of policy appears set towards deeper integration of materials security within the CHIPS framework.