Senate passes bill to boost U.S. chip production and China competition, sending to House

The Senate on Wednesday passed bipartisan legislation aimed to help the U.S. compete with China by injecting tens of billions of dollars into the domestic production of semiconductor chips.

The bill, known as the CHIPS-plus or Chips and Science Act, passed in a 64-33 vote. It will now head to the House, where lawmakers hope to pass it and send it to the White House for President Joe Biden’s signature before Congress leaves town in early August.

House Speaker Nancy Pelosi, D-Calif., said the chip bill “is a major victory for American families and the American economy” when it passed a key Senate vote earlier in July.

The package includes more than $52 billion for U.S. companies producing computer chips, as well as tax credits to encourage investment in chip manufacturing. It also provides funding to spur the innovation and development of other U.S. technologies.

Advocates say it is vital to America’s economy and national security to build more chips, which are increasingly critical components in everyday household items like consumer electronics and automobiles as technological innovation makes machines smarter.

But the chips have recently been in short supply, following sudden shifts in consumer demand related to the Covid-19 pandemic. And the U.S. share of global chip production has fallen precipitously in recent decades, while China and other nations have invested heavily in the industry.

The U.S. also makes little of the most advanced types of semiconductors, which are largely produced in Taiwan, the epicenter of rising political tensions with China.

Much modern warfare is powered by vast arrays of semiconductors — each Javelin missile launching system contains hundreds, for instance — leading U.S. defense officials to worry about the nation’s reliance on foreign producers for its chip supply.

America’s continued dependence on overseas semiconductors is “flat-out dangerous, and a disruption to our chip supply would be catastrophic,” national security advisor Jake Sullivan said Monday during a meeting with Biden.

“The longer we wait, the more dangerous the disruption,” he said.

The president, during that meeting, also blamed the chip shortage for the sky-high inflation that has dogged his presidency. A lack of chips available for new-car manufacturing has been linked to soaring prices for used cars, which are pushing inflation higher.

“America invented the semiconductor. It’s time to bring it home,” Biden said.

CHIPS-plus is a pared-down version of broader legislation that was long stewing in the House and Senate. The larger measure came under threat from Republican leadership earlier this month. The slimmer bill cleared the Senate’s 60-vote filibuster threshold on Tuesday, setting up a shoe-in final vote, which requires just a simple majority in the 100-seat chamber.

The legislation had faced criticism from some Senate Republicans, such as Florida’s Marco Rubio, who said it lacked “guardrails” to prevent any of the funding from winding up in China’s hands. Other critics have argued that the U.S. would have to spend many billions more to have a real chance at competing with the world’s leading chipmakers.

Sen. Bernie Sanders, I-Vt., also come out earlier this month against a previous version of the bill, calling it a “$53 billion blank check to profitable microchip and semiconductor companies.”

“Let us build back the U.S. microchip industry,” Sanders said before Wednesday’s vote, “but let us do it in a way that benefits all of our society, not just a handful of wealthy profitable corporations.”

But Senate Majority Leader Chuck Schumer, D-N.Y., argued Wednesday morning that the legislation will mark “a turning point for American leadership in the 21st Century.”

“By approving one of the largest investments in science, technology and manufacturing in decades … we say that America’s best years are yet to come,” Schumer said on the Senate floor prior to the final vote.