Senate Advances CHIPS Act

July 22, 2022

The Senate advanced the CHIPS Act (H.R. 4346), legislation that would provide $52 billion for semiconductor manufacturing incentives and research investments. The legislation also includes an investment tax credit for semiconductor manufacturing.

Semiconductor Industry Association (SIA) President and CEO John Neuffer said, “The Senate CHIPS Act would greatly strengthen America’s economy, national security, and leadership in the technologies that will determine our future. The bill would spur hundreds of billions of dollars in private semiconductor investments in America, create hundreds of thousands of U.S. jobs, and help ensure our country has the chips it needs for critical defense applications and sectors of the economy.

“We applaud the bipartisan group of leaders in Congress who have worked tirelessly to advance the CHIPS Act. We look forward to working with them toward final Senate passage and then swift approval in the House. This is America’s window of opportunity to re-invigorate chip manufacturing, design, and research on U.S. shores, and Congress should seize it before the window slams shut.”

On Feb. 4, 2022, the House passed critical CHIPS Act investments totaling $52 billion to strengthen domestic semiconductor manufacturing and research as part of competitiveness legislation, the America COMPETES Act. The Senate passed the same level of funding for the CHIPS Act as part of its version of competitiveness legislation, the United States Competition and Innovation Act (USICA), in June 2021. In recent months, both chambers have been working to develop unified legislation that strengthens domestic chip production and innovation.

The share of modern semiconductor manufacturing capacity located in the U.S. has decreased from 37% in 1990 to 12% today. This decline is largely due to substantial manufacturing incentives offered by the governments of our global competitors, placing the U.S. at a competitive disadvantage in attracting new construction of semiconductor manufacturing facilities, or “fabs.” Additionally, federal investment in semiconductor research has been flat as a share of GDP, while other governments have invested substantially in research initiatives to strengthen their own semiconductor capabilities, and existing U.S. tax incentives for R&D lag those of other countries.

An investment tax credit for semiconductor manufacturing and design, as called for by the FABS Act introduced in the House, is an important complement to other manufacturing incentives and research investments. A combination of grants, tax credits, and research investments is needed to turbocharge U.S. semiconductor production and innovation.