The bill, which promises tax breaks and subsidies for companies investing in semiconductor manufacturing in America, has been positioned by lawmakers as a key part of the ongoing US-China competition both economically and as a matter of national security.
Tuesday’s vote, a procedural measure, clears the way for the potential passage of a final version of the bill next week by both the House of Representatives and the Senate.
Just before the vote, Senate Majority leader Chuck Schumer said the bill “will fight inflation, boost American manufacturing, ease our supply chains and protect American security interests”.
“America will fall behind in so many areas if we don’t pass this bill. We could very well lose our ranking as the No 1 economy and innovator in the world,” he said.
Since the 1990s, America has fallen from producing 37% of the global semiconductor output to 12%, and over 80% of today’s semiconductor manufacturing capacity is now in Asia, according to the Semiconductor Industry Association, a lobbying group.
Supporters of the bill say this type of government support is crucial for America to remain competitive with other nations that are doing the same.
“This is not a free market situation,” said Sen Rob Portman on the Senate floor Tuesday.
“If the market decides, and China is offering US$150 billion – which they are over the next 10 years – when Europe has its own equivalent legislation to ours and is offering tens of billions of dollars or tens of billions of euros, or when South Korea or when Japan or when Taiwan are offering these huge incentives, it’s very difficult to see us being able to bring these chips back to America,” he said.
Earlier this month, chipmakers from Asia and the US warned they would delay or reduce American investment if the funding promised by the long-stalled legislation failed to advance.
Intel cited the delay for its decision to postpone construction of a US$20 billion facility in Ohio that was set to break ground on July 22. Taiwan Semiconductor Manufacturing Co, the world’s largest chipmaker, said the pace of constructing its US$12 billion plant in Arizona would depend on US subsidies.
“The message is not subtle. If companies do not think it is profitable to make chips here in America, they are going to go somewhere else,” Schumer said earlier this week.
Last week, Intel CEO Pat Gelsinger implored Congress to not go home for the August recess without passing the bill, implying that without it he and other CEOs would invest their companies’ jobs elsewhere.
Those objecting to the bill took issue with the head of a profitable corporation dangling a loss of American jobs if Congress did not heed his company’s legislative preferences.
Among the most prominent opposition voices from President Joe Biden’s side of the aisle was Sen Bernie Sanders, who raised concerns that the bill could set a precedent for bad-faith demands for funding from companies under the guise of the broader US-China competition.
“You pass this bill and tomorrow we’ll be hearing, no doubt, from the cellphone industry, from the computer laptop industry, about how they need their welfare checks as well,” he said.
The Chips Act – officially called the Creating Helpful Incentives to Produce Semiconductors for America Act – was proposed in June 2020 amid an unprecedented global semiconductor supply crunch and was signed into law as part of a larger national defence act in January 2021. But lawmakers were unable to secure funding for the Chips Act at that time, meaning its programmes were essentially dead in the water.
The Senate then passed its own version of the Chips Act as part of another package of legislation, this one aimed at boosting American competitiveness more broadly, in June 2021. House Democrats then unveiled their own version of a US competition bill earlier this year, titled the America Competes Act, which also includes the US$52 billion Chips Act.
Since then, lawmakers from both the upper and lower houses have been attempting to reconcile the two versions of the Chips Act to agree on broad outlines and the amount of money needed.