§ 1.48D-4. Advanced manufacturing facility of an eligible taxpayer.

(i) Example 1: Primary purpose; in general. In January 2025, X Corp, a calendar-year C corporation, begins construction of a facility that will manufacture semiconductor manufacturing equipment that could be used in a facility that will engage in semiconductor fabrication (semiconductor fabrication facility). A portion of the equipment produced, however, could be used for manufacturing operations of a facility that is not engaged in semiconductor manufacturing. X Corp enters into a contract with Y Corp, which is building a semiconductor fabrication facility to be placed in service in July 2026, to supply Y Corp with equipment that is integral to semiconductor fabrication. Such equipment represents more than 50 percent of the potential output of X Corp's facility (by cost to produce such equipment) of X Corp's facility for the first year of operations. X Corp's facility will be considered as having a primary purpose of manufacturing of semiconductor manufacturing equipment for the first year of its operations.

(ii) Example 2: Primary purpose; semiconductor wafer production. X Corp, a calendar-year C corporation, is engaged in the production of solar wafers (that is, X Corp is engaged in semiconductor wafer production). In January 2025, X Corp receives the necessary permits to begin construction of a facility designed for semiconductor wafer production within the meaning of § 1.48D-2. X Corp enters into a contract to supply such wafers to an unrelated person. Such contract represents more than 50 percent of X Corp's potential output (by revenue received) for the tax year that the facility is placed in service. Because the contract to sell wafers represents more than 50 percent of X Corp's potential output (by revenue received), X Corp's facility will be considered as having a primary purpose of semiconductor wafer production within the meaning of paragraph (c)(1) of this section.

(iii) Example 3: Primary purpose; vertically integrated manufacturer. Z Corp, a C corporation, is a vertically integrated manufacturer. In January 2025, Z Corp begins construction of a facility that will produce raw materials and other consumables for use in the manufacturing of semiconductors and such facility will also engage in semiconductor wafer production and semiconductor fabrication. Z Corp enters into separate sales contracts to sell units produced from the semiconductor fabrication with a variety of unrelated companies that are engaged in semiconductor packaging. Z Corp also enters into a sales contract with A Corp to sell raw materials that it produces at the facility to A Corp. Z Corp's production of units from its semiconductor fabrication sold to companies engaged in semiconductor packaging represents more than 50 percent of the potential output (by cost) of Z Corp's facility for the first year of operations; therefore, Z Corp's facility will be considered as having a primary purpose of manufacturing of semiconductors.

(iv) Example 4: No primary purpose; vertically integrated manufacturer. Assume the same facts as in paragraph (c)(3)(iii) of this section (Example 3), except that Z Corp's production of such raw materials represents more than 50 percent of the potential output of Z Corp's facility for the first year of operations. Z Corp's facility will not be considered as having a primary purpose of manufacturing of semiconductors.