Senate Advances Bill To Boost U.S. Microchip Production—Here’s What’s In It

Topline

A bill that would earmark billions in federal funds to boost U.S. semiconductor production amid a nationwide chip shortage passed a key Senate vote Tuesday morning, possibly clearing the way for the legislation to pass through the chamber and on to the House.

Key Facts

The Senate voted 64-32 across party lines to break the legislative filibuster and limit debate on the “CHIPS plus” bill, allowing for a final vote later this week, with Senate Majority Leader Chuck Schumer (D-N.Y.) reportedly saying he hopes senators “can remain on track to finish this legislation ASAP.”

The legislation includes $52.7 billion for domestic chip manufacturing and research subsidies, along with $2 billion earmarked for less advanced legacy chips, which are crucial to the military and automotive industry, according to a bill summary.

The subsidies would largely go toward U.S. companies to help fund the construction of new semiconductor fabrication plants, where the chips are created.

It also features a 25% tax credit for U.S. semiconductor manufacturing investments, and $1.5 billion set aside for developing technology to help U.S. firms wean off their dependence on foreign telecommunications equipment.

The bill is a slimmed-down version of legislation that Republicans threatened to block earlier this month if Democrats continued to pursue unrelated efforts to pass a package to fund their climate, tax and prescription drug priorities.

What To Watch For

Lawmakers who support the bill are in a race against time to pass the bill through the Senate and the House and send it to President Joe Biden’s desk before Congress begins a five-week recess in the second week of August. House Speaker Nancy Pelosi (D-Calif.) has voiced her support for the bill and said the House plans to vote on it as soon as this week.

Crucial Quote

“America invented the semiconductor. It’s time to bring it home,” Biden said Monday afternoon during a meeting in which he participated virtually. He said the legislation will “advance our nation’s competitiveness and our technological edge,” and urged lawmakers to pass the bill as soon as possible.

Key Background

Supporters of the legislation argue the bill will help increase domestic semiconductor production and offset the effects of a global chip shortage that emerged during the Covid-19 pandemic. It would also make the U.S. more competitive against China, which is the world leader in building new chip factories, they say. About 75% of the world’s chips are produced in East Asia, particularly Taiwan. The current version of the “CHIPS plus” bill also allocates $11 billion for the Department of Commerce to create “regional technology hubs” dedicated to manufacturing and technology advances, and $200 billion in funding for scientific research.

Chief Critic

Bernie Sanders (I-Vt.) is one of the bill’s most vocal opponents and has compared it to a “bribe” to keep large companies in the U.S. after years of closing down domestic plants and outsourcing jobs overseas. “The five biggest semiconductor companies . . . made $70 billion in profits last year. Does it sound like these companies really need corporate welfare?” he said in a statement earlier this month.

Further Reading

Chip funding bill clears key Senate hurdle (Axios)

Bill to boost U.S. chip production and competition with China clears key Senate hurdle (CNBC)