The U.S. CHIPS Act is close to approval. The Senate has voted in favor of a trimmer package of subsidy measures that’s more focused on rebuilding the American semiconductor industry.

On July 19, the Senate voted 64–34, demonstrating bipartisan support for the bill designed to provide more than $52 billion to boost U.S. semiconductor competition with China.

“That’s a clear signal that after a lot of hard work — and after a lot of compromise from both sides — the path is clear for this CHIPS plus bill to reach final passage,” Senate majority leader Chuck Schumer said in a prepared statement. “With this bill, we can make America a major chip producer once again, which will help ease pressures on our supply chains, strengthen our national security, and generate another wave of American economic activity for years to come.”

The Senate is expected to vote on passage of a final version of the bill as early as this week. It still must pass the House of Representatives and go to President Joe Biden’s desk for his signature before it becomes law.

The Biden administration and the U.S. Department of Commerce (DOC) have strongly urged that the legislation must be approved as soon as possible because the European Union and governments in other parts of the world have offered more attractive stimulus measures that may slow investments, including Intel’s $20 billion fab project in the U.S. state of Ohio.

“Unfortunately, CHIPS Act funding has moved more slowly than we expected,” Intel said in a June 23 statement to CNBC. “It is time for Congress to act so we can move forward at the speed and scale we have long envisioned for Ohio.”

About 70% of global chip production is in Asia, including the most advanced semiconductors, while only 12 percent is in the U.S., according to the DOC. The auto industry produced 7.7 million fewer cars in 2021 due to chip shortages. Companies also lost more than $500 billion worldwide, including $210 billion in the auto industry in 2021, according to Deloitte.

Senator John Cornyn, an author of the Senate’s original proposal last year, warned on Twitter of the consequences if the subsidy package fails to win approval.

“If the U.S. lost access to advanced semiconductors (none made in U.S.) in the first year, GDP could shrink by 3.2 percent, and we could lose 2.4 million jobs. The GDP loss would 3× larger ($718 B) than the estimated $240 B of U.S. GDP lost in 2021 due to the ongoing chip shortage.”

A year ago, the Senate approved a $250 billion version of the bill. After the House of Representatives drafted their own legislation that included climate change funding, the effort stalled because of opposition from the Republican Party.

Devil in the details

As often happens with U.S. legislation, still more revisions may be introduced to the proposed CHIPS Act in the days before it is signed into law.

Some U.S. semiconductor companies have opposed the CHIPs Act as it stands because it would provide support only to manufacturers such as Intel, according to a Reuters report. Fabless chip designers that compete with Intel, including AMD, Nvidia, and Qualcomm, wouldn’t qualify for the subsidies because they don’t manufacture chips, according to the report.

U.S. chipmakers Intel, Texas Instruments, and Micron Technology would benefit from both the CHIPS Act as well as an investment tax credit proposed by another measure called the FABS Act to purchase fab tools, the report said.

“You have Intel that might get $20 billion with CHIPS Act plus $5 billion or $10 billion under the FABS Act,” Reuters reported, citing an industry insider speaking on the condition of anonymity. “$30 billion goes to your direct competitor, and you don’t get a penny? That’s going to cause problems in the market.”

A lobbying organization that represents the U.S. chip industry argued for broader measures that help chipmakers and fabless companies. “The FABS Act should include expenditures for both manufacturing and design to help strengthen the entire semiconductor ecosystem,” the Semiconductor Industry Association said in a statement.

Others have argued that the CHIPs Act would subsidize profitable chipmakers that don’t need the support, while denying assistance to other parts of the U.S. electronics ecosystem that are struggling to survive.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved