US Senate Approves $52 Billion US Chips Act

Image credit: US Senate

One step closer? Senate approves $52 billion in US subsidies to encourage semiconductor manufacturing in the United States

The US Senate on Monday approved a bill to provide $52 billion in US subsidies for semiconductor manufacturing.

It was back in May 2021 when US Senate Democratic Leader Chuck Schumer first unveiled the revised bipartisan legislation known as the US Chip Act, which sets aside $52 billion to significantly boost American semiconductor production and research over five years.

It comes after Intel CEO Pat Gelsinger last week spoke about the strategic importance of semiconductor fabrication plants (fabs).


US Chips Act

With the global chip shortage over the past few years during the Covid-19 pandemic, the chip boss compared semiconductors to oil, and said making more chips in the United States and Europe can avoid global crises in the future.

Intel is building fabs around the world. In January Intel announced plans to build a $20 billion US chipmaking facility in Ohio.

Now Reuters reported that the US Senate on Monday again approved a bill to provide $52 billion in subsidies for semiconductor chips manufacturing.

It should be remembered that chip companies typically require substantial cash incentives or tax breaks, in return for building an expensive chip factory in a particular location.

Reuters reported that the 68-28 procedural vote sends the legislation back to the House of Representatives in a cumbersome process to ultimately launch a formal process known as a “conference” where lawmakers from both chambers will seek agreement on a compromise version.

According to Reuters, the US Senate first passed the chips legislation in June 2021 that also authorised $190 billion to strengthen US technology and research to compete with China, while the House passed its version in early February.

Senate Commerce Committee chair Maria Cantwell reportedly said the vote was crucial to “get us to real negotiations.”

White House spokeswoman Jen Psaki said the Senate vote was another step “to strengthen our supply chains, make more in America, and outcompete China and the rest of the world for decades to come. We look forward to the House of Representatives moving quickly to start the formal conference process as well.”

Summer timeframe?

A senior House Democratic aide was quoted by Reuters as saying the chamber is set to take up the measure and send it back to the Senate as soon as later this week.

The Senate will need to vote again to launch the conference.

A final agreement might not be reached until summer.

The US Chip Act is not supported by all Senators, with independent Senator Bernie Sanders slamming the $52 billion in subsidies, calling it “corporate greed.”

Senator Sanders also said taxpayers should get warrants or equity from profitable chips firms in exchange for subsidies.

“The financial gains made by these companies must be shared with the American people, not just wealthy shareholders,” Sanders was quoted by Reuters as saying.

Meanwhile US Commerce Secretary Gina Raimondo noted that two decades ago, the United States produced nearly 40 percent of all chips, while today it accounts for only 12 percent of global production.

The vast majority of computer chips are currently made in Asia, especially Taiwan.

A severe drought in that country, coupled with supply chain issues during the Coronavirus pandemic, has badly hampered the delivery of sufficient number of chips in the past couple of years.

The fact that most manufacturing takes place in Taiwan, has also raised security concerns amid Russia’s invasion of Ukraine.