After months and months of start-and-stop negotiations, the Senate on Tuesday voted to advance a $52 billion bill aimed at boosting domestic semiconductor production which lawmakers say is crucial to ease supply chain disruptions, bolster national security and increase competitiveness with China.
The measure, known as the CHIPS Act of 2022, contains $39 billion in financial aid to “build, expand, or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging or research and development.” Of that figure, $6 billion can be used for loan guarantees or direct loans.
The bill cleared a major procedural hurdle on Tuesday night, advancing comfortably in a 64-34 vote.
An $11 billion will be devoted to the Commerce Department for advanced research and development programs, $2 billion will go to the Pentagon for workforce applications and national defense programs, $500 million will be additionally utilized by the State Department to “support international information and communications technology security and semiconductor supply chain activities,” and $200 million will be used for a domestic workforce and education fund.
The measure also includes certain “safeguards,” including language which says that federal funds cannot be used for stock buybacks, nor can they be used to “build advanced semiconductor production facilities in countries that present a national security concern,” including China.
The Senate passed its $250 billion US Innovation and Competition Act, or USICA, in June 2021 by a 68-32 vote. The bill includes $52 billion to incentivize more companies to build factories in the US In February, the House approved its own version, called the America Competes Act — a $350 billion plan. That legislation passed all on party lines. Both bills aim to make the US more competitive against China and strengthen domestic supply chains by investing in the chip industry.
Senate and House lawmakers have been negotiating toward compromise legislation, as their bills differ on how to improve research and development, whether to expedite visas for skilled foreign citizens, and how to protect US research from foreign interference.
The Biden administration and other key lawmakers signaled that they would support a scaled-down version of the measure that just bolsters semiconductor manufacturing, with the preference to approve that more urgently and move other parts of the bill later.
“There are several parts of the broader legislation that are important, and I am committed to doing whatever it takes to get them over the finish line in this Congress,” Commerce Secretary Gina Raimondo wrote in a statement. “But chips funding is the only part of this bill that we have to pass right now to avoid facing devastating consequences.”
After Tuesday’s vote, Senate Majority Leader Chuck Schumer, DN.Y., filed a bipartisan amendment which would include tens of billions of dollars in funding for the Commerce Department, the National Science Foundation and other agencies.
Schumer, one of the bill’s biggest backers, said Tuesday that he expects many of the provisions left out of the scaled-down bill will be brought up again at a later date.
“There are lots of things Republicans and Democrats want in the eventual bill that will not be in this bill, even if science is included,” he said, adding that there will be a “bipartisan desire” to get a deal done.
Should the bill pass the Senate, the House is expected to take up the measure and send it to President Joe Biden’s desk.
In a letter to her Democratic colleagues Wednesday, House Speaker Nancy Pelosi, D-Calif., hailed Tuesday’s vote as “important progress” on the measure, which she called “a bold, bipartisan package that will lower costs for families here at home while reigniting American competitiveness on the world stage.”
Pelosi said that passing the bill is an “economic necessity to lower costs for consumers” and “a national security imperative as we seek to reduce our dependence on foreign manufacturers.”
“The Chips Act for America is a major victory for American families and the American economy,” Pelosi wrote. “As the Senate undergoes its process, we are optimism that the House will be able to take this bill up as early as next week.”
Biden administration officials had recently sounded the alarm about the long-stalled legislation, urging that if it did not pass quickly, there would be dire ramifications for national security and the economy — including risking the loss of domestic a number of planned multi-billion dollar investments.
Intel CEO Patrick Gelsinger said last week he might delay development of a $20 billion semiconductor manufacturing facility in Ohio if Congress does not soon approve billions of dollars in subsides for his industry.
In an interview with Washington Post Live last week, Gelsinger said he will “make a decision to delay our project in Ohio if” a chip subsidy bill “doesn’t pass.”
“There are real‑time consequences if this doesn’t pass,” he said.
Similarly, Commerce Secretary Raimondo told CNBC last month that Taiwan-based semiconductor company GlobalWafers might not follow through on its plans to build a factory in Sherman, Texas, if Congress doesn’t approve the incentives for chip production.
“This investment that they’re making is contingent upon Congress passing” the funding, she said. “The CEO told me that herself.”
Sanjay Mehrotra, president and CEO of Micron, a computer memory and data storage company, told Fox News on Monday the public funding is needed to level the playing field with countries whose governments have invested heavily in semiconductor manufacturing for more than 20 years.
The US share of the worldwide chip manufacturing market has declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association.
“We need to get it (the legislation) across the finish line for jobs, for the resilient domestic supply chain here in the US and, of course, at the same time, (for) economic security, but also national security,” Mehrotra said.
In an interview with Spectrum News last week, Cecilia Rouse, chair of the White House Council of Economic Advisers, said the bills are very important in increasing the United States’ economic capacity.
“They go to helping us make our economy more productive, which helps us address challenges such as Russia’s war against Ukraine, challenges such inflation,” she said. “It helps us address those policies and face those challenges and maintain economic health going forward as well. So we call on Congress to do the right thing.”
“Bottom line is there are very real, very devastating consequences if Congress doesn’t do its job in the month of July,” Raimondo said in an interview with The Associated Press.
Spectrum News’ Ryan Chatelain and Austin Landis contributed to this report.
The Associated Press contributed to this report.