The U.S. Wants to Spend $AU75 Billion on Chips, if Only It Could Pass This Damn Bill

The U.S. Wants to Spend $AU75 Billion on Chips, if Only It Could Pass This Damn Bill

The world has gotten a little mad for chips (the kind that go in your computers, not your stomach), and the U.S. wants to take a big piece of the semiconductor pie away from countries like China. But first, it has to pass a bill, so expect a lot of last-minute wrangling, sweating, mind changing, weird additions, and overall headaches before this is all over.

Washington insiders are reportedly expecting movement on the bill this week after it reached the senate last week, and sponsors are hoping that it will come to a final vote. Somebody who clearly minored in creative writing went all acronym-heavy with this thing and called it the “Creating Helpful Incentives to Produce Semiconductors for America (CHIPS)” act, and last week, senators voted to bring forward the CHIPS-plus bill that would allocate over $US52 ($74.90) billion to the semiconductor industry in the U.S. Of that, $US39 ($56) billion is portioned to get American chip manufacturing up to snuff.

The bill would also create tax credits for semiconductor production alongside a trust fund with corporations that would aid the microelectronic supply chain. Because the Senate voted 64-34 to bring the bill into the chamber last week, it’s something that Democrats hope will clear the gridlock. The Hill reported that Democratic Senator Chuck Schumer, the Senate majority leader, filed a 1,000+ page amendment to add funding for science, energy, and commerce agencies as well.

This is as far as this bill has gotten despite partisan wrangling, even as the so-called chip shortage led to production issues across computer, electronic, automotive, and a host of other industries that rely on chips. Part of the issue has been rolling covid lockdowns in cities like Shanghai and Shenzhen.

It should be noted that much of the world’s semiconductors come from TSMC, headquartered in Taiwan, and Samsung, headquartered in South Korea. Still, China is currently planning to invest an estimated $US1.4 ($2) trillion into its broader tech industry.

Which Lawmakers Support CHIPS, and Which Don’t

The American chip-making industry has been meowing like a cat at dinner time, hoping that governments will step in and help it increase production. Intel CEO Pat Gelsinger previously said the shortage could last into 2024. Congress was considering two previous bills that were meant to combat the chip shortage, but those bills shorted out. With talks ongoing, reports said that President Joe Biden was encouraging Congress to pass the domestic semiconductor bill first.

But now, the ruling party in Washington is trying to put all its might behind getting the semiconductor bill over the finish line. Reuters reported that on Monday, Biden met virtually with CEOs and labour leaders in the semiconductor industry. If it meets the 60-vote threshold, the bill will then head over to the House, where The Hill reported House Majority Leader Steny Hoyer and Speaker Nancy Pelosi, both Democrats, said they would work fast on it. Arizona Democratic Senator Mark Kelly, who has been leading this bill’s passage, said in an interview with Yahoo Finance Monday “We’ll get it to the president.”

But there is already some gum clogging up the works. Senator Bernie Sanders has put the bill on blast for what he said were “corporate giveaways” to the chip industry, further calling the funds “a $US53 ($76) billion blank check to some of the most profitable corporations in America.” He also complained about these companies moving factories and jobs overseas, even after receiving billions in government subsidies. While Intel has several chip fabs located within the US and is currently building a $US20 ($28) billion dollar Ohio factory, it recently announced that it’s also building a $US17.3 ($24.9) billion chip fab in Germany and adding a nearly $US12.3 ($17) billion expansion to its Ireland fab.

AP reported Sanders is in strange company here alongside a range of conservatives in Congress, think tanks, and media who are concerned about corporate spending. Those still in support of the bill, including Utah Republican Mitt Romney, essentially said that since countries like China subsidise tech, the U.S. needs to as well. Other Republicans have made mention of their reservations toward more spending, according to Bloomberg, but with November midterms nearing, their true motivation might be to avoid giving the president and his party any brownie points.

Which Chipmakers Are Set to Benefit Most from CHIPS?

Of course, you can expect that the biggest American chip manufacturers and industry groups are salivating over these funds. Who’s out to benefit? Mostly those in the U.S. who are making their own chips, including Intel, Texas Instruments, and Micron Technology, according to Reuters. Intel has already been growing its U.S. operations with that planned $US20 ($28) billion Ohio factory, though even that factory opening could be delayed, according to June reports. With that $US52 ($72) billion in funding on the table, the company could be in line for even more possible expansion, not to mention a tax credit to buy manufacturing tools inside its new plants.

Meanwhile, companies like AMD and Nvidia rely on other companies to manufacture their chips, notably TSMC. These players support other bills like the FABS Act, which does more to give tax credits to chip designers rather than manufacturers. One person from a chip manufacturer who spoke anonymously to Reuters said Intel might be getting $US20 ($28) billion with CHIPS, and if Congress passes FABS, it could be in for another $US10 ($14) billion. The source added “that’s going to cause problems in the market.”

Of course, what’s good for the goose is good for the people designing electronic ganders, so to say. A boost in production will incentivise more growth in the entire field. At least, that’s what the Semiconductor Industry Association likes to say about it.

On the other side of the tech industry, big tech companies including Alphabet (Google’s parent company), Amazon, Dell, IBM, Microsoft, Salesforce, VMWare and many others are all jonesing for this bill to pass, based on a letter these companies sent to members of Congress on June 15. The letter was propositioned by the SIA to urge the bill’s passage.

“The rest of the world is not waiting for the U.S. to act,” the letter reads. “Our global competitors are investing in their industry, their workers, and their economies, and it is imperative that Congress act to enhance U.S. competitiveness.”