Congress Passes CHIPS Act to Boost Production, Research

After more than a year of wrangling, the Senate on Wednesday passed a bipartisan tech and science funding bill in a 64-33 vote. The CHIPS and Science Act commits $280 billion to be spent over five years in what is being called the largest manufacturing, research and development initiative of its kind. The largest single area of investment is $76 billion to fund domestic semiconductor production, which includes $24 billion in new tax incentives. Yesterday, the bill passed in a 243-187 House vote and now heads to President Biden’s desk to be signed into law. The legislation aims to bolster national security by making the U.S. chip independent and boosting competition against China.

The measure also includes billions for research into artificial intelligence, quantum computing, robotics and next-generation wireless. A summary of the CHIPS and Science Act details $10 billion for the Department of Commerce to help fund regional technology hubs across the country.

“The hubs would aim to link together research universities with private industry in an effort to create Silicon Valley-like centers for technology innovation in areas hollowed out by globalization,” writes The New York Times.

“This legislation is a major milestone, the largest single investment that we’ve seen in a long time in U.S. R&D,” said Senator Maria Cantwell (D-Washington), chair of the Senate Committee on Commerce, Science, and Transportation and a key architect of the package.

A quick look at expenditures shows $39 billion in direct funding (including $2 billion to support production of legacy chips primarily used in the auto industry); a new 25 percent investment tax credit, valued at $24 billion, for capital expenditures to expand U.S. semiconductor manufacturing; $11 billion to the Department of Commerce and $2 billion to the Department of Defense to develop and prototype the next generation of semiconductors in the United States.

The legislation “stipulates that chip manufacturers that take the federal funds and tax subsidies provided by the legislation cannot expand existing factories or build new ones in countries including China and Russia, in an effort to curtail advanced chip manufacturing in nations that present a national security concern,” NYT reports.

Surprisingly, no one involved last week with pushing through CHIPS-Plus — which at $52 billion was to be a slimmed-down version of the $250 billion United States Innovation and Competition Act the Senate passed in June 2021 — seems concerned about the five-fold expansion in 10-days, a phenomenon dissected by Axios.

House Passes Chips Act to Boost U.S. Semiconductor Production, The Wall Street Journal, 7/28/22
House Passes Bill to Subsidize U.S.-Made Semiconductor Chips in Win for Biden, The Washington Post, 7/28/22
China Has Leapfrogged the U.S. in Key Technologies. Can a New Law Help?, The New York Times, 7/28/22
Rival Chipmakers Brag About Having the Tiniest Products, but Who Can Tell?, The Wall Street Journal, 7/28/22

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