US Senate passes bill providing US$52 billion in subsidies to semiconductor industry
- Approved 64 to 33 in a display of bipartisan support, legislation moves to the House of Representatives for a vote
- The bill has been framed as essential to the US competition with China, and includes potentially tens of billions of dollars more for science and tech spending
The US Senate approved billions of dollars in new federal funding for the American semiconductor industry on Wednesday, advancing a top priority for Washington’s efforts to out-compete China.
“Today, by approving one of the largest investments in science, technology and manufacturing in decades – in decades – we say that America’s best years are yet to come,” Senator Charles Schumer, the Senate majority leader and an original sponsor of the bill, said before the vote.
“If we didn’t get there first, our rivals, chief among them the Chinese Communist Party, would likely beat us to the punch and reshape the world in their authoritarian image,” Schumer, a Democrat from New York, said. “Frightening prospect.”
The legislation, which has gone by many names and wound up being known as the Chips and Science Act, passed the Senate by a bipartisan vote of 64 to 33, the latest sign that both Democrats and Republicans regard competition with China as an urgent issue that must be addressed – even if they don’t always agree on what to do about it.
The bill now heads to the House of Representatives for a vote. If the House passes it and US President Joe Biden signs it into law, the US semiconductor industry would receive a windfall of more than $52 billion – a huge boost to a sector vital to everything from military weapons to cars to video games.
The White House has cited the global shortage of semiconductors as one cause of surging inflation in the US, and just this week, a top Pentagon official described the chips as “ground zero of our tech competition with China”.
The bill also seeks to block companies that receive the funds from spending their resources on advanced chip manufacturing facilities in China – or any other country deemed to pose a national security threat to the US.
Some critics of the bill have warned that those guardrails still do not go far enough to stop companies from spending the new federal funds in China, while others have said that wealthy chip makers like Intel do not need an infusion of federal money.
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Senator Todd Young, the Indiana Republican who was the other original sponsor of the Senate bill, said its new investments would put the US “on the offensive” in its economic competition with Beijing.
“China’s government is planning on winning the AI race, winning future wars, and winning the future – and the truth is, if we’re being honest with ourselves, Beijing’s well on its way to accomplishing these goals,” he said before the vote.
The legislation includes US$39 billion for semiconductor manufacturing in the US, and another US$11 billion for chip research and development.
Another US$1.5 billion, the bill’s authors said, goes to “shore up the global telecommunications supply chain and limit the scope of involvement globally of telecommunication companies with close ties to the Communist Party of China, like Huawei”.
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This funding comes amid reports in recent days that the US has been investigating possible spying activities by Huawei Technologies, the Chinese telecoms giant, of US military installations on behalf of the Chinese government – allegations Huawei and Beijing have denied.
The US government had already ordered US telecoms companies to “rip and replace” any equipment they are using made by Huawei or ZTE, another Chinese telecoms supplier, but carriers have said they haven’t been given enough funding to make it happen.
The legislation also opens the door to billions of dollars for hi-tech scientific research and education – both areas where Biden has said the US is lagging dangerously behind China. Congress would have to separately approve any new funding for the research and education programmes.
Senate aides said they were hopeful that the House would quickly pass the bill.
Representative Michael McCaul of Texas, the senior Republican on the House Foreign Affairs Committee and an original sponsor of the bill, urged his House colleagues to support it.
“It’s been a long process, but this important legislation will ensure we manufacture advanced semiconductor chips – the brains behind our most advanced technology today and the technology of tomorrow – right here in America. Not in China,” he said before the Senate vote.
The bill has had a long and winding journey through Congress. For more than a year, it has been a part of sprawling legislation that targets nearly every aspect of the US-China competition.
Many of those other China priorities are still caught up in a lengthy negotiation process between the House and Senate that will continue into the fall, after lawmakers return from their expected August recess, according to a Senate aide familiar with the deliberations.
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One recent version of the broader China competition bill would create a human rights envoy for China’s Xinjiang region, where Washington says Beijing is committing genocide and crimes against humanity aimed at Muslim Uygurs there.
It would also further solidify US ties to Taiwan by changing the name of Taipei’s de facto embassy in Washington to “Taiwan Representative Office in the United States”. Such a move would be welcomed by Taiwan, but certain to infuriate China, which views the self-governed island as its own territory.
“That important work must continue. It will,” Schumer said of the broader competition bill. “And it’s my intention to put the conference committee on the floor in September after the work is complete.”
