After over a year of negotiations, Congress is finally advancing a bill to provide $52 billion to the semiconductor industry amid a chip shortage threatening U.S. competitiveness and national security.
The Senate is eyeing a crucial cloture vote as early as Thursday which, if it gains the required 60 votes, could put the bill on the path to become a law within the coming weeks.
"This has been bipartisan work in the Senate at its best,” Senate Majority Leader Chuck Schumer (D-NY) said Tuesday, expressing optimism amid last-minute negotiations aiming to pass the bill by August recess.
Both the House and Senate passed sweeping versions of the bill earlier this year that included various measures aimed at making the U.S. more competitive with China. More recently, lawmakers have discussed a “slimmed down” version including only inducements to the semiconductor industry.
On Tuesday night, the latest version of the bill became public. Dubbed a “CHIPS+” bill, the effort now includes a bit more than just cash for the semiconductor industry but remains a far cry from early ambitions.
Here are the highlights of the latest in the effort, which Commerce Secretary Gina Raimondo recently vowed would get to Biden’s desk “this summer.”
‘Something must be done’
A top bullet point in a summary of the bill obtained by Punchbowl News outlines that $50 billion will go to semiconductor companies as expected. Of those funds, $39 billion will “build, expand, or modernize domestic facilities.” This key funding will go toward new chip-making plants in the U.S., which Biden and his aides have called crucial for America’s economic future and national security.
The remainder — another $11 billion — is set aside for research and development. This money appears designed to alleviate a rift that had been developing between semiconductor companies like Advanced Micro Devices (AMD), Qualcomm (QCOM) and Nvidia (NVDA), which had focused on designing — but not manufacturing — these crucial chips and were worried about being left out.
Roughly $2 billion more will help fund other areas of the semiconductor industry like education, defense, and future innovation.
Intel (INTC) will be a key recipient of the funds. The company recently postponed the groundbreaking on an Ohio factory because of delays with the bill but has promised to move ahead if President Joe Biden signs it.
Ten days ago, we took delivery of the land in Ohio for our new Mega fab. We have equipment in place and have started prep work for beginning major construction, but … we are still waiting on Congress to act. pic.twitter.com/HC8F8cYPoI
— Pat Gelsinger (@PGelsinger) July 12, 2022
Speaking to Yahoo Finance last week, the Commerce Secretary noted that the bill could fund both U.S. companies and foreign companies looking to invest in manufacturing inside the U.S. She noted the Taiwanese company GlobalWafers was eyeing an expansion in Texas, but said if the bill doesn’t pass ”then instead they'll do it in South Korea.”
A new investment tax credit
The bill is also set to include another new benefit to the semiconductor industry in the form of investment tax credit for manufacturing. The price tag there could be as high as $200 billion in the years ahead.
It’s part of a suite of efforts that, advocates say, will allow the U.S. to catch up in the global semiconductor manufacturing race.
The U.S. role in semiconductor manufacturing has fallen from nearly 40% in 1990 to 12% today, according to a recent report from the Semiconductor Industry Association. The situation is even worse with the world’s most advanced logic semiconductors, 100% of which were manufactured overseas in 2019. The group has applauded progress on the bill.
Daniel Clifton, head of Washington research at Strategas, mentioned on Yahoo Finance last week that many view semiconductors as "the new oil." He added that if a nation can “control oil and chips, you start to control the production of just about anything that's going to happen in the economy and we could see that that's where the long-term trend is.”
Other ‘guardrails’ aimed at China
The bill is also set to restrict semiconductor companies' activities, banning new work “in specific countries that present a national security threat to the United States.” The language is clearly aimed at China, which is actively looking to bolster its semiconductor industry as well. The provision is designed to ensure that China doesn’t receive any benefits from the new U.S. government funds.
Schumer and his allies are also reportedly looking to include language designed to promote non-Chinese 5G equipment manufacturing as well as billions of dollars to beef up the National Science Foundation and the National Institute of Standards and Technology to help the U.S. compete against China.
A test vote in the Senate on Tuesday, which Schumer said was to gauge support for the science provisions, overwhelmingly passed with 64 votes — leading proponents to hope that the final bill will include those provisions as well.
The bipartisan effort comes amid opposition to the effort from a swatch of Republicans but also one of Biden's own allies. Sen Bernie Sanders (I-VT) recently called the bill a "corporate welfare bill for the microchip industry" and voted no on Tuesday.
Despite that opposition, lawmakers hope that Senate will move to end debate this week, setting up a vote for final passage next week. The House of Representatives would come after that and, if that chamber clears the bill, Biden would just need to sign it for it to become law.
The president himself has repeatedly pressed lawmakers to get it done and ready for his signature as soon as possible.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.