Politics

Senate advances more than $50 billion bill to boost U.S. semiconductor production

Key Points
  • The Senate on Tuesday voted to advance a slimmed-down version of its bill designed to boost U.S. semiconductor competition with China.
  • The legislation, which would provide about $50 billion in subsidies to bolster U.S. computer chip manufacturing, is a multifaceted bipartisan effort.
  • But the current legislation comes more than one year after the Senate first approved a $250 billion bill to reinforce U.S. chipmaking to compete with China.
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Republicans push for last-minute additions to CHIPS Act

The Senate voted to advance a slimmed-down version of its bill designed to boost U.S. semiconductor competition with China.

The bill cleared a key procedural hurdle Tuesday evening in a 64-34 vote even as lawmakers worked to finish various sections of the legislation.

The bill, which would provide about $50 billion in subsidies to bolster U.S. computer chip manufacturing, is a multifaceted bipartisan effort that combines the interests of several committees, ranging from national security to economics.

The Senate's procedural step forward on Tuesday paves the way for the chamber to hold a vote on final passage later this week or early next week. The bill would then travel to the House for passage before it would head to President Joe Biden's desk for signature into law.

The broadest aim of the legislation is to incentivize semiconductor production within the U.S. to decrease dependence on Asia-based manufacturers.

Sefa Ozel | E+ | Getty Images

Biden administration officials say a larger domestic chip industry would help ease the supply chain disruptions that have hampered the economic recovery from Covid-19 and insulate the U.S. from supply routes dominated by political rival China.

A global shortage of chips over the past two years rippled through several industries, including automakers, mobile phone and consumer technology companies and defense systems manufacturers.

Sen. John Cornyn, a Texas Republican and lead author of the Senate's original text, stressed the economic implications of the legislation in a pair of Twitter posts published Tuesday.

U.S. Senator John Cornyn (R-TX) speaks with reporters at the U.S. Capitol in Washington, DC.
Jon Cherry | Reuters

"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 wrote. "The GDP loss would 3X larger ($718 B) than the estimated $240 B of US GDP lost in 2021 due to the ongoing chip shortage."

The centerpiece of the legislation is $52 billion to rebuild domestic chip production and tax breaks to encourage the construction of plants based in the U.S. Chip stocks rallied on Tuesday ahead of the expected vote, with Intel up 3.9%, Nvidia 5.5% higher and Texas Instruments rising 3.1%, all ahead of the broader S&P 500's 2.8% gain.

The procedural step forward comes more than one year after the Senate in a bipartisan vote first approved a $250 billion bill to reinforce U.S. chipmaking and invigorate American research and development.

But the House never considered that legislation after the Senate cleared it in June 2021.

House Democrats drafted their own version of a Chinese competition act, with a gentler national security tone and a greater emphasis on climate change funding. Republicans opposed the bill.

Democrats in both chambers have for months attempted to reconcile differences between the two versions. With annual inflation running above 9% and the party set for tough midterm elections, the Biden administration has suggested it would approve a simpler bill aimed at just magnifying chip production.

It's not certain whether Senate Democrats will be able to garner the 60 votes needed to circumvent a filibuster on final legislation. Doing so would require support from several Republicans, who have lamented that much of their work to craft provisions to compete with China will likely be tossed.

Even top Democrats, including Foreign Relations Committee Chairman Bob Menendez of New Jersey, have decried the diluted bill.

"Now we're at a point where I don't think anybody really knows what the final bill might look like, or kind of where the votes are," Senate Republican Whip John Thune, R-S.D., told Politico last week. "We know where the votes were last time. But that was a different time and it was a different bill than what we're talking about today."

But Democrats have also run into newer issues with Republicans, who have threatened to derail the semiconductor bill if Majority Leader Chuck Schumer, D-N.Y., continues to pursue a separate plan to pass a party-line bill on taxes and climate policy.

Other late-stage policy decisions could complicate matters further, including whether to drop tariffs on Chinese goods first imposed by former President Donald Trump.