U.S. Senate passes bill to boost chip manufacturing, compete with China

The U.S. Senate on Wednesday passed sweeping legislation to subsidise the domestic semiconductor industry, hoping to boost companies as they compete with China and alleviate a persistent shortage that has affected everything from cars to weapons and video games.

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The Senate passed the long-awaited bill by 64 to 33. The House of Representatives is expected to approve it as soon as later this week, which would send it to the White House for President Joe Biden to sign into law.

The long-awaited “Chips and Science” act provides about $52 billion in government subsidies for U.S. semiconductor production as well as an investment tax credit for chip plants estimated to be worth $24 billion.

The legislation would also authorise more than $170 billion over five years to boost U.S. scientific research efforts to better compete with China. Congress would still need to pass separate appropriations legislation to fund those investments.

“This legislation is going to create good paying jobs, it will alleviate supply chains, it will help lower costs, and it will protect America’s national security interests,” the Senate’s Democratic majority leader, Chuck Schumer, said urging support for the bill.

Most of the funding approved on Wednesday was expected to fund new factories, but these will take two or three years to complete once construction begins. Boeing Co said Wednesday it still faces supply chain issues from chips shortages.

General Motors Co said Tuesday it had more than 90,000 unfinished vehicles, mostly high-margin trucks and SUVs, waiting for chips and other parts. Thousands are parked in southeast Michigan.

Months of work

The bill’s enactment into law would come after well over a year of work. A more extensive version of the legislation passed the Senate with great fanfare in June 2021, but stalled in the House. This frustrated lawmakers from both parties who view competition with China and global supply chain issues as top priorities.

To spur Congress to act, Biden and other supporters of the bill cast the issue in national security terms, saying it was essential to ensure U.S. production of chips crucial to a wide range of consumer goods and military equipment.

Biden urged the House to quickly pass the bill in a statement after the Senate vote.

“As Americans are worried about the state of the economy and the cost of living, the CHIPS bill is one answer: it will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers,” he said.

Critics like Senator Bernie Sanders – the only member of the Senate Democratic caucus to vote against the bill – have called the measure a “blank check” to highly profitable chips companies.

Biden met virtually on Monday with the chief executives of Lockheed Martin Corp, Medtronic PLC and Cummins Inc along with labour leaders as part of the administration’s push for the legislation.