Senate pushes semiconductor bill to compete with China

Sefa Ozel | E+ | Getty Images

The Senate voted in favor of a watered-down version of its bill designed to increase U.S. semiconductor competition with China.

The bill cleared a key procedural hurdle Tuesday night in a 64-34 vote, even as lawmakers worked to finalize various sections of the legislation.

The bill, which provides about $50 billion in subsidies to boost U.S. computer chip manufacturing, is a multifaceted bipartisan effort that brings together interests from several committees, from national security to the economy.

A procedural step forward by the Senate on Tuesday clears the way for the chamber to hold a vote on final passage later this week or early next week. The bill will then go to the House of Representatives for passage before heading to President Joe Biden’s desk to be signed into law.

The broadest goal of the legislation is to stimulate U.S. semiconductor manufacturing to reduce reliance on Asian manufacturers.

Biden administration officials say a larger domestic chip industry would help ease supply chain disruptions that have hampered the economy’s post-Covid-19 recovery and insulate the U.S. from supply routes dominated by political rival China.

The global chip shortage has affected several industries over the past two years, including automakers, mobile phone and consumer technology companies, and defense systems makers.

Sen. John Cornyn, Republican of Texas and lead author of the original Senate text, emphasized the economic impact of the legislation in a pair of Twitter posts published on Tuesday.

US Senator John Cornyn (R-TX) speaks to reporters at the US Capitol in Washington, DC.

John Cherry | Reuters

“If the U.S. loses access to advanced semiconductors (not made in the U.S.) in the first year, GDP could shrink by 3.2 percent and we could lose 2.4 million jobs,” he wrote. “The GDP loss will be 3 times larger ($718 billion) than the estimated US GDP loss of $240 billion in 2021 due to persistent chip shortages.”

The centerpiece of the legislation is $52 billion to revive domestic chip production and tax breaks to encourage construction of factories in the U.S. Chip stocks rose on Tuesday ahead of the expected vote, with Intel up 3.9%, Nvidia up 5.5% and Texas Instruments rising up 3.1%, outperforming the broader S&P 500, which rose 2.8%.

The procedural step forward comes more than a year after the Senate, in a bipartisan vote, first approved a $250 billion bill to bolster US chip manufacturing and boost American research and development.

But the House never took up the legislation after the Senate approved it in June 2021.

House Democrats have drafted their own version of China’s competition law, with a softer national security tone and a stronger focus on climate change funding. Republicans opposed the bill.

Democrats in both chambers have spent months trying to reconcile differences between the two versions. With annual inflation above 9% and the party facing tough midterm elections, the Biden administration has suggested it will approve a simpler bill aimed only at increasing chip production.

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It is unclear whether Senate Democrats will be able to muster the 60 votes needed to override the final bill. That would require the support of several Republicans, who have complained that much of their work on drafting provisions to compete with China is likely to be undone.

Even top Democrats, including Foreign Relations Committee Chairman Bob Menendez of New Jersey, condemned the watered-down bill.

“We’re at a point now where I don’t think anybody really knows what the final bill might look like or where the votes are,” John Thune, the GOP representative in the Senate, told Politico last week. “We know where the votes were last time. But that was a different time, and it was a different bill than the one we’re talking about today.”

But Democrats also faced new challenges with Republicans who threatened to derail the semiconductor bill if Majority Leader Chuck Schumer continued to pursue a separate plan to pass a bipartisan tax and climate policy bill.

Other late-stage policy decisions could further complicate the situation, including the repeal of tariffs on Chinese goods imposed by former President Donald Trump.

Senate pushes semiconductor bill to compete with China

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