(Bloomberg) — The Senate on Wednesday approved legislation that includes $52 billion in subsidies and incentives for U.S. semiconductor manufacturing, an industry that has steadily lost ground to foreign competitors in recent years.
The 64-33 vote comes after more than a year of debate and marks a major legislative victory for President Joe Biden, whose agenda has largely stalled in the Senate, where 60 votes are required to pass a majority of laws.
The bill is expected to pass the House later this week and then go to Biden’s desk for his signature.
Wall Street is likely to welcome the help. The Philadelphia Stock Exchange Semiconductor Index fell 30% this year through Tuesday, positioning the gauge for its worst annual performance since 2008. All 30 stocks in the index were down for 2022 as of Tuesday’s close.
In addition to semiconductor funding, the legislation includes money for research and job training and 5G wireless technology.
The move has been portrayed as a way to reinvigorate the US industrial base and strengthen the country’s national security interests against future supply chain disruptions abroad, where the vast majority of advanced semiconductors are currently produced. .
“Our grandchildren will have good paying jobs in industries that we can’t even imagine because of what we do today,” Senate Majority Leader Chuck Schumer said before the final vote on the measure, which he described as “it’s going to take a long time.” to arrive”. .”
Senate Republican Leader Mitch McConnell said the bill was about “national security,” adding that he wished it had cost less. The nonpartisan Congressional Budget Office estimates the legislation would increase the US budget deficit by $79 billion over a decade.
Speaker Nancy Pelosi has voiced her support. Rep. Michael McCaul, a Republican from Texas whose state will benefit from the legislation, sponsored the chip funding and has been urging his colleagues to support the measure. However, House Minority Leader Kevin McCarthy told reporters Tuesday night that he would vote no.
Among the key provisions of the package:
- $39 billion in financial assistance to build national semiconductor facilities
- $11 billion to fund chip research and workforce development
- $2 billion for defense-related chip manufacturing
- Restrictions on the use of funds for the repurchase of shares, foreign investment
- A 25% investment tax credit for the manufacture of semiconductors and tools to create semiconductors.
- $500 million for an international secure communications program
- $200 million for training of workers in the semiconductor industry
- $1.5 billion for public wireless supply chain innovation
- Changes and authorizes funding for programs at the National Aeronautics and Space Administration, the National Institute of Standards and Technology, the National Science Foundation
- Authorizes new programs under the Department of Energy
The road to passage of the measure has had multiple twists and turns over the past 18 months as lawmakers wrestled with both policy and regulatory priorities, trying to get a bill passed by both chambers.
It was originally introduced in the Senate last year by Schumer and Sen. Todd Young, a Republican from Indiana, under the title “The Endless Borders Act” and focused on revamping the National Science Foundation and bolstering US competitiveness. USA with China.
A bipartisan group of senators, led by Democrats Mark Warner of Virginia and Mark Kelly of Arizona and Republicans John Cornyn of Texas and Tom Cotton of Arkansas, later managed to add $52 billion in emergency appropriations for the semiconductor industry, allocating funds for a measure that had previously been enacted as part of the 2021 defense bill.
At various times, the legislation seemed almost dead, even as chip companies including Intel Corp. warned that the delays threatened plans to expand domestic manufacturing.
Chip-making facilities, or factories, take two to three years to become fully operational, which is one reason proponents pushed to pass the legislation as soon as possible.
Sen. Maria Cantwell, a Washington Democrat and chair of the Commerce Committee, which had jurisdiction over the legislation, said “if we don’t start building here, we won’t catch up” on developing new chip technology for the future.
Opposition to the bill in the Senate united socialist Bernie Sanders, an independent from Vermont, with free-market conservatives like Republican Pat Toomey of Pennsylvania.
“If we really want to beat China, we cannot emulate Beijing’s semi-socialist economic model,” Toomey said in a statement. “The best way to encourage investment, spur economic growth and improve American competitiveness is to create policies that benefit all industries, businesses and workers alike.”
Sanders told the Senate that US industrial policy “should not mean that the government provides massive amounts of corporate welfare to profitable corporations for nothing in return.”
In the House, McCarthy and other Republicans oppose the legislation, with some criticizing it for not being tough enough on China. Rep. Jim Banks of Indiana, chairman of the Republican Study Committee, called it a “bogus China bill” in a tweet.
Young, speaking on Bloomberg Television, said he believed Biden could sign the bill into law as early as the weekend. “I hope that happens,” Young said.
The United States still leads the world in chip design but has largely outsourced manufacturing to foreign companies such as Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co. The US share of semiconductor manufacturing has fallen from 37% to 12% since 1990 and the country currently does not produce any of the most advanced chips, which are mostly made in Taiwan.