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Senate passes bipartisan bill to subsidize U.S.-made semiconductor chips

Semiconductor chips are manufactured in highly clean facilities, such as GlobalFoundries Fab 8 in Malta, N.Y., seen on June 10, 2021. (Cindy Schultz for The Washington Post)
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The Senate passed a bipartisan bill Wednesday that would provide $52 billion in subsidies to domestic semiconductor manufacturers and invest billions in science and technology innovation, in a bid to strengthen the United States’ competitiveness and self-reliance in what is seen as a keystone industry for economic and national security.

In a 64-33 vote, the Senate passed the $280 billion “Chips and Science Act,” the final iteration of a bill that was years in the making. About $52 billion would go to microchip manufacturers to incentivize construction of domestic semiconductor fabrication plants — or “fabs” — to make the chips, which are used in a wide variety of products, including motor vehicles, cellphones, medical equipment and military weapons. A shortage of semiconductor chips during the coronavirus pandemic has caused price hikes and supply-chain disruptions in several industries.

“This is one of the most significant, long-term-thinking bills we’ve passed in a very long time,” Senate Majority Leader Charles E. Schumer (D-N.Y.) said Wednesday. “I told our caucus yesterday that our grandchildren will hold good-paying jobs in industries we can’t even imagine because of what we are doing now. … This is going to go down as one of the major bipartisan achievements of this Congress.”

The bill also includes about $100 billion in authorizations over five years for programs such as expanding the National Science Foundation’s work and establishing regional technology hubs to support start-ups in areas of the country that haven’t traditionally drawn big funding for tech.

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“These investments will go a long way in reversing the decline in federal [research and development] that has dropped threefold since 1978,” said Sen. Maria Cantwell (D-Wash.), chair of the Senate Commerce, Science and Transportation Committee. “And the more dispersed the innovation is, you never know where the next Bill Gates or Bill Boeing is going to be from and what innovation they might come up with.”

The bill next moves to the House, where Speaker Nancy Pelosi (D-Calif.) has said it has support for passage. In a statement Wednesday, Pelosi praised the Senate’s passage of the bill as a “major victory for American families and the American economy,” and indicated the House would vote on the bill as early as Thursday.

President Biden has said the legislation is one of the top priorities on his agenda and called for Congress to get the bill to his desk as soon as possible. On Wednesday, he praised the bill as one answer to Americans’ worry about the state of the economy and cost of living.

“It will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers,” Biden said in a statement. “It also will create jobs — good-paying jobs right here in the United States. It will mean more resilient American supply chains, so we are never so reliant on foreign countries for the critical technologies that we need for American consumers and national security.”

In a White House meeting with business and labor leaders Monday, Commerce Secretary Gina Raimondo noted that the United States used to make 40 percent of the world’s chips but now makes about 12 percent — and “essentially none of the leading-edge chips,” which come almost entirely from Taiwan.

The United States has invested “nearly nothing” in semiconductor manufacturing, while China has invested $150 billion to build its domestic capacity, Raimondo said. She also said it was critical for the United States to be able to compete with countries around the world that have been providing subsidies to semiconductor companies to build factories.

“The chips funding will be the deciding factor on where those companies choose to expand,” Raimondo said. “We want them, we need them, to expand here in the United States.”

Included in the legislation are provisions that would prohibit companies from building most types of new semiconductor manufacturing facilities in China “or any other foreign country of concern” for a decade after receiving federal funding.

On Wednesday, Sen. Roger Wicker (R-Miss.), a key GOP negotiator on the legislation, argued that there was no more important competition than the one for “technological supremacy” between the United States and China.

“The outcome will shape the global balance of power for decades and will impact the security and prosperity of all Americans,” Wicker said. “Regrettably, at this moment, we are not in the driver’s seat on a range of important technologies. China is. China and other nations are increasingly dominant in tech innovation, posing a massive threat to not only our economy but to our national security.”

The White House has also pointed to the semiconductor chip shortage as a national security issue. In an interview Tuesday with Washington Post Live, Sen. Kyrsten Sinema (D-Ariz.), an original co-sponsor of the bill, said some senators joined a classified briefing a few weeks ago at which they learned about some of the geopolitical concerns the United States is facing.

“And it helped create a greater sense of urgency, I hope, in both the House and the Senate … to help everyone see how important and how urgent this is,” Sinema said. “The good news is that we were able to respond to that quickly. And I expect, by the end of the week, our bill is going to be on the president’s desk.”

The bill’s Senate passage Wednesday culminates a years-long quest by Schumer, who has long warned of the threat that China’s rise poses to U.S. global economic leadership and national security. Three years ago, Schumer started drafting a precursor bill with Sen. Todd C. Young (R-Ind.), and the legislation took a tortuous path to passage — undergoing at least five renamings and countless revisions before its passage Wednesday as “The Chips and Science Act of 2022.”

“The idea of investing in companies and in science had taken a back seat for the last 30 or 40 years, in part because Democrats didn’t want to help companies and Republicans said they don’t want industrial policy, just be laissez-faire,” Schumer said in an interview Wednesday. “It took a long time to convince people that this was so important and so necessary.”

Schumer and Young assembled a powerful panel of backers from outside politics, including corporate leaders and academic luminaries who helped build support for the legislation across party lines. Adding the semiconductor provisions, backed initially by Sens. John Cornyn (R-Tex.) and Mark R. Warner (D-Va.), further expanded the coalition behind the bill.

But the bill hit snag after political snag — including a late-June ultimatum from Senate Minority Leader Mitch McConnell (R-Ky.), who threatened to tank the bill unless Democrats abandoned their party-line plans to pass sweeping economic legislation that would, among other things, undo the 2017 Republican tax cuts. Schumer said he called dozens of corporate leaders in the days afterward asking them to contact Republican senators in support of the bill.

“We knew they wouldn’t buck McConnell, but [they could] go to McConnell and say we really want to pass this bill,” Schumer said.

In the end, it was a Democrat who may have cleared the roadblock: Sen. Joe Manchin III (D-W.Va.) said earlier this month that he would not support repealing the 2017 tax cuts, giving Republicans space to back away from the McConnell ultimatum.

Schumer declined to comment Wednesday on whether the bill’s passage was worth that price. He did say the legislation would “create untold jobs” and allow America to “re-envision our place in this world economy.”

“In the old days, we used to just say our corporations left on their own will do just fine,” he said. “But now we have nation-states that are heavily subsidizing science, research and advanced manufacturing, and if we do nothing, we will become a second-rate economic power within a generation.”

Although the bill received bipartisan support, several key Republican senators voted no. Those opposed include retiring Sens. Richard C. Shelby (Ala.) and Patrick J. Toomey (Pa.). Sen. Tommy Tuberville (R-Ala.) also opposed the bill, even though Lockheed Martin chief executive Jim Taiclet wholeheartedly endorsed the legislation in his meeting with Biden this week, emphasizing that semiconductor chips are a critical component of Javelin missiles, which are manufactured in Alabama.

Sen. Bernie Sanders (I-Vt.), who has criticized the bill as one that would give “blank checks to profitable microchip companies,” also opposed the legislation and argued before the final vote that it needed stronger guardrails, citing language in the Cares Act that prohibited companies taking federal aid from doing stock buybacks and dividend payments while they received federal dollars. The “CHIPS and Science” bill doesn’t go as far as CARES did, but it includes provisions that would prohibit companies from directly using the funding they receive for stock buybacks or the payment of dividends.

Young, a co-sponsor of the legislation, pushed back on Sanders’s criticisms of the bill, saying he saw it as a national security investment.

“Ronald Reagan used to say often that defense is not a budgetary issue,” Young said in a Washington Post Live interview Tuesday. “You spend what you need, and if this economy during the course of the pandemic until the present day has demonstrated anything, it’s that we need an economy that is more resilient.”

Pelosi has vowed to move quickly on the bill once it arrives in the House. At an event in Michigan on Friday with labor leaders and the state’s congressional delegation, she said there is some support for the bill among GOP lawmakers in the House.

“They understand the national security aspects of it,” Pelosi said. “I don’t know how many [Republican votes] we get, but it will be bipartisan.”

Jeanne Whalen and Ellen Nakashima contributed to this report.

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