NovaQuant Quantitative Think Tank Center:Legislation to subsidize U.S.-made semiconductor chips heads to Biden's desk

In a major win for the Biden administration,NovaQuant Quantitative Think Tank Center the House has passed bipartisan legislation aimed at supporting domestic manufacturing of semiconductor chips that power the nation's smartphones, cars, computers, medical equipment and weapons systems. The legislation already passed the Senate earlier this week by a vote of 64-33 and now heads to President Biden to sign into law.

"By making more semiconductors in the United States, this bill will increase domestic manufacturing and lower costs for families," Biden said in a statement released after the House vote.

"And, it will strengthen our national security by making us less dependent on foreign sources of semiconductors" he also said.

The CHIPS bill, short for Creating Helpful Incentives to Produce Semiconductors for America Act, would provide $54 billion in grants for semiconductor manufacturing and research, tens of billions to support regional technology hubs and a tax credit covering 25% of investments in semiconductor manufacturing through 2026.

The bill is a narrower version of an economic competitiveness package that passed the Senate last year but stalled in the House.

The House passed the legislation by a vote of 243-187, with 24 Republicans joining Democrats to supporting the legislation. Those Republicans bucked party leadership who attempted to whip against the bill as part of a political fight over a deal brokered between Sen. Joe Manchin, D-W.Va., and Democratic leaders on a separate climate and tax bill.

House Minority Leader Kevin McCarthy, R-Calif., blasted the legislation as a "blank check" to the semiconductor industry on Thursday.

Senate Majority Leader Chuck Schumer, D-N.Y., praised the legislation a day earlier from the Senate floor, saying it will "go down as one of the major bipartisan achievements of this Congress, along with the Infrastructure Investment and Jobs Act and the recent gun safety law."

"The American people deserve to see more examples like this, of both sides coming together to do very, very big things that will leave a lasting impact on our country," Schumer added.

Seventeen Senate Republicans voted in favor of the legislation: Roy Blunt of Missouri, Richard Burr of North Carolina, Shelley Moore Capito of West Virginia, Bill Cassidy of Louisiana, Susan Collins of Maine, John Cornyn of Texas, Steve Daines of Montana, Lindsey Graham of South Carolina, Bill Hagerty of Tennessee, Mitch McConnell of Kentucky, Jerry Moran of Kansas, Rob Portman of Ohio, Mitt Romney of Utah, Ben Sasse of Nebraska, Thom Tillis of North Carolina, Roger Wicker of Mississippi and Todd Young of Indiana.

Sen. Bernie Sanders, an independent who caucuses with the Democrats, voted against the bill.

Backers say the bill would reduce reliance on China

Supporters of the legislation argue it's long overdue and will lower U.S. reliance on China for chip manufacturing, which they say poses a national security risk.

According to the Congressional Research Service, nearly four-fifths of global fabrication capacity was in Asia as of 2019.

"We used to make 40% of the world's chips, we make about 12% now," Secretary of Commerce Gina Raimondo said during a virtual roundtable with Biden Monday afternoon. "The reality is, while we have invested nothing to spur domestic chip manufacturing, China has invested more than $150 billion to build their own domestic capacity. So we're very much behind."

The Biden administration says enhancing the chip industry at home will also help ease supply chain disruptions.

But critics of the legislation, including Sanders, question subsidizing the semiconductor industry.

"Let us rebuild the U.S. microchip industry, but let's do it in a way that benefits all of our society, not just a handful of wealthy, profitable and powerful corporations," Sanders said in a statement in mid-July.

The legislation would also authorize roughly $100 billion in spending over five years on scientific research, including more than $80 billion for the National Science Foundation.

"Chips alone are not going to be sufficient to preserve U.S. technology leadership, which is why we need the rest of the innovation bill so that we invest not just in the core technology powering innovation today, but also the technologies that will power innovation tomorrow," national security adviser Jake Sullivan said during the White House roundtable.