US Congress Moves Toward $52 Billion in Subsidies for Semiconductor
July 21, 2022
The Senate this week took a key step toward passing a bill meant to
provide $52 billion in subsidies to the semiconductor industry in the
United States, part of an effort that lawmakers have characterized as
protecting the country from supply shortages such as those that struck
during the coronavirus pandemic.
The bill, called the CHIPS for America Act, also seeks to make the U.S.
more competitive with China.
Semiconductors, commonly known as chips, are essential elements of
modern manufacturing. They are used in computers, cellphones and
automobiles as well as in various other capacities. During the pandemic,
chip shortages slowed manufacturing in multiple industries to a crawl.
The legislation would create incentives for semiconductor manufacturers
to build chip fabrication plants in the U.S. to bring back domestic
production levels, which have fallen from more than one-third of total
global capacity three decades ago to less than 12% now.
Discussing the legislation on the Senate floor, Senator Rob Portman, a
Republican, said, "It is a plan to make America more competitive with
China, and a plan to bring good jobs back to America."
In a 64-34 procedural vote Tuesday, with more than a dozen Republicans
voting with the overwhelming majority of Democrats, the Senate cleared
the way for the legislation to come to a vote as soon as this week. The
House of Representatives would need to pass the bill — which is still
not in its final form — before President Joe Biden could sign it into
Making the case
Before the vote Tuesday, Senate Majority Leader Chuck Schumer told his
colleagues that the bill "will fight inflation, boost American
manufacturing, ease our supply chains and protect American security
He added: "America will fall behind in so many areas if we don't pass
this bill, and we could very well lose our ranking as the No. 1 economy
and innovator in the world if we can't pass this."
Senator John Cornyn, the most senior Republican to vote in favor of
advancing the bill, used Twitter to make his case ahead of the vote.
"If the US lost access to advanced semiconductors (none made in US) in
the first year, GDP could shrink by 3.2 percent and we could lose 2.4
million jobs," he tweeted. "The GDP loss would 3X larger ($718 B) than
the estimated $240 B of US GDP lost in 2021 due to the ongoing chip
The money in the bill comes with significant strings attached. Companies
accepting the subsidies must agree not to use the funds for to buy back
stock, pay shareholder dividends, or expand manufacturing in certain
countries identified in the bill. Provisions allow the government to
"claw back" the funds if a recipient violates any of the bill's
If the bill advances to the House, it would mark the second time a
bipartisan group of senators tried to secure money for the semiconductor
industry. Last year, the Senate passed a $250 billion package that
included broader research and development funding.
When the House received the bill, it waited nearly a year to pass its
own version and made a number of additions that Senate Republicans would
not agree to. The bill never advanced.
Now, however, things might be different. In a letter circulated to
members of the House Democratic caucus on Wednesday, House Speaker Nancy
Pelosi wrote in favor of the bill.
"With this package, the United States returns to its status as a world
leader in the manufacturing of semiconductor chips," Pelosi wrote,
noting that the bill would create an estimated 100,000 well-paid
government contracting jobs in the industry.
"Doing so is an economic necessity to lower costs for consumers and to
win in the 21st Century Economy, as well as a national security
imperative as we seek to reduce our dependence on foreign
manufacturers," Pelosi wrote.
an email exchange with VOA, Ajit Manocha, president and CEO of Semi, a
global industry trade group, said, "We are pleased to see action to
reverse the decline in the U.S. share of global semiconductor
manufacturing capacity, which has fallen by 50 percent in the last 20
years and is forecast to shrink further."
"The availability of robust incentives in other countries and the lack
of a federal U.S. incentive have been key factors driving the location
of more overseas manufacturing facilities," Manocha added. "If the
United States wants to maintain or increase its share of global
semiconductor manufacturing capacity, the federal government absolutely
needs to get in the game."
Semiconductor Industry Association President and CEO John Neuffer said
in a statement, "The Senate CHIPS Act would greatly strengthen America's
economy, national security, and leadership in the technologies that will
determine our future."
He added, "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."