US lawmakers propose US$22.8 billion in aid to semiconductor industry amid rivalry with China

The proposal includes a refundable income tax credit for semiconductor equipment, funds to match state incentives to build factories, and R&D funding
While some firms such as Intel and Micron Technology still make chips in the US, the industry’s centre of gravity has shifted to Asia

Semiconductors

Reuters

Published: 9:57am, 11 Jun, 2020

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A bipartisan group of US lawmakers on Wednesday introduced a bill that would provide more than US$22.8 billion in aid for semiconductor manufacturers, aiming to spur the construction of chip factories in America amid a simmering strategic technology rivalry with China.

Chip factories can cost up to US$15 billion to build, with much of the expense in the form of pricey tools. The proposal would create a 40 per cent refundable income tax credit for semiconductor equipment, US$10 billion in federal funds to match state incentives to build factories, and US$12 billion in research and development funding.

Senators John Cornyn, a Texas Republican, and Mark Warner, a Virginia Democrat, introduced the bill in the Senate. Aides to Representatives Michael McCaul, a Texas Republican, and Doris Matsui, a California Democrat, said the two planned to introduce a version in the US House of Representatives on Thursday.

While some US firms such as Intel and Micron Technology still make chips in the United States, the industry’s centre of gravity has shifted to Asia, where Taiwan Semiconductor Manufacturing Co has more than half of the overall market for contract manufacturing chips and even stronger hold on the most advanced chips.

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Firms including iPhone maker Apple, Qualcomm and Nvidia all rely on TSMC and other Asian foundries to manufacture their chips.

The dual shocks of the novel coronavirus pandemic, which disrupted chip supply chains, and Beijing’s move to strengthen its control over Hong Kong have prompted alarm in Washington over having advanced chip manufacturing concentrated in Taiwan, a US ally across a narrow straight from China, which has spent billions of dollars bolstering its domestic chip manufacturing industry.

TSMC last month said it plans to build a factory in Arizona.

While a network of “trusted foundries” exists in the United States to help supply chips to the US government, many chips must still be sourced from Asia.

“As the Chinese Communist Party aims to dominate the entire semiconductor supply chain, it is critical that we supercharge our industry here at home,” McCaul said in a statement.

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