Federal Termination of $285 Million CHIPS Contract Impacts Durham Semiconductor Initiative

The U.S. Department of Commerce has terminated a $285 million contract awarded to the Semiconductor Research Corporation (SRC) for the SMART USA Institute, a project aimed at enhancing domestic semiconductor manufacturing through digital twin technology. The decision, communicated on December 10, 2025, was described as a “termination for convenience,” a standard clause in federal contracts that allows the government to withdraw funding without cause. The termination reflects a shift in priorities under the Trump administration, which has refocused its CHIPS (Creating Helpful Incentives to Produce Semiconductors) strategy.

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SMART USA was established to unite academic and industrial labs to create virtual manufacturing replicas, aiming to reduce development costs by over 35%, cut manufacturing time by 30%, and improve yields by 40%. The initiative was part of a broader effort under the CHIPS Act, passed in 2022, which allocated over $10 billion to bolster semiconductor research and development in the U.S. The project had garnered significant support, with SRC managing over $1 billion in funding from both public and private sectors.

Digital Twins Center Faces Funding Cut

Todd Younkin, Executive Director of SRC, stated, “While this transition is challenging, it does not define our future... We have united the semiconductor community for decades, and will continue to do so.” He emphasized that SRC had met all performance benchmarks prior to the contract's termination. The Commerce Department's spokesperson noted that the decision aligns with the administration's goal of securing U.S. leadership in critical technologies.

Digital Twins Center Faces Funding Cut

The termination has drawn criticism from members of Congress, including Representatives Zoe Lofgren and Haley Stevens, who expressed concerns about the implications for the National Institute of Standards and Technology (NIST). They questioned the decision to halt semiconductor R&D programs, arguing it could damage NIST's reputation as a reliable partner for industry and academia. They warned that such actions might deter future collaborations.

Digital Twins Center Faces Funding Cut

While the Commerce Department cited a shift in strategic focus as the reason for the termination, there is no public explanation detailing the specific changes in priorities. Additionally, SRC has not disclosed whether it received any funds from the now-canceled contract. The lack of transparency surrounding the decision raises questions about the future of semiconductor research initiatives under the current administration.

Digital Twins Center Faces Funding Cut

In light of the funding loss, SMART USA is exploring next steps and plans to hold a Q&A webinar for its members to address concerns. Despite the setback, Younkin reassured stakeholders that SRC would continue to support semiconductor research through its other programs. The future of SMART USA remains uncertain, as it navigates the implications of losing federal backing while striving to maintain its collaborative efforts in the semiconductor industry.

Digital Twins Center Faces Funding Cut

• “ Regarding SRC, Younkin stated: “While this transition is challenging, it does not define our future.” — Todd Younkin, Executive Director of SRC

Digital Twins Center Faces Funding Cut

• “Federal contracting decisions evolve over time, and 'termination for convenience' is an established mechanism in those agreements and is not a reflection of the significant work we were doing,” — Todd Younkin, Executive Director of SRC

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• “NIST has a reputation as a neutral and steadfast partner that can work with any industry and academic organization. This reputation is very much at risk” — Zoe Lofgren and Haley Stevens, House of Representatives Committee on Science, Space, and Technology

Digital Twins Center Faces Funding Cut