Senate passes bill to boost American computer chip production

July 27, 2022

Wednesday, July 27, 2022 06:15 PM EDT

By Associated Press and Inside INdiana Business Staff

WASHINGTON, D.C. - A bill designed to encourage more semiconductor companies to build chip plants in the United States passed the Senate on Wednesday as lawmakers raced to finish work on a key priority of the Biden administration. The $280 billion measure, which awaits a House vote, includes federal grants and tax breaks for companies that construct their chip facilities in the U.S. The legislation also directs Congress to significantly increase spending on high-tech research programs that lawmakers say will help the country stay economically competitive in the decades ahead. In Indiana, the bill has been closely watched following last week’s announcement that Minnesota-based SkyWater Technology (Nasdaq: SKYT) plans to build a $1.8 billion semiconductor R&D and production facility in West Lafayette that is expected to create 750 jobs over five years. Senate passage came by a 64-33 vote. The House vote is expected later this week as lawmakers try to wrap up business before returning to their home states and districts in August. House Speaker Nancy Pelosi, D-Calif., has said she is confident there is enough GOP support to overcome potential defections from Democrats who view the subsidy effort to boost semiconductor companies as a misplaced priority. Seventeen Republicans voted for the measure. Sen. Bernie Sanders, I-Vt., broke ranks with Democrats in voting against the bill. Proponents of the legislation say other countries are spending billons of dollars to lure chipmakers. Backers say the U.S. must do the same or risk losing a secure supply of the semiconductors that power automobiles, computers, appliances and some of the military’s most advanced weapons systems. Senate Majority Leader Chuck Schumer, D-N.Y., said the bill represented one of the nation’s largest investments in science and manufacturing in decades and that with the Senate’s approval, “we say that America’s best years are yet to come.” Opponents have been critical of the bill’s price tag. It is projected to increase federal deficits by about $79 billion over 10 years. President Joe Biden said the bill would create jobs and lower costs on a wide range of products from cars to dishwashers. “For decades, some ‘experts’ said we needed to give up on manufacturing in America. I never believed that. Manufacturing jobs are back,” Biden said. “Thanks to this bill, we are going to have even more of them. The House should promptly pass it and send this bill to my desk.” The bill has been in the works for years, starting with efforts by Schumer and Sen. Todd Young, R-Ind., to increase the government’s investment in high tech research and development. While the bill has taken several twists and turns, one constant theme that lawmakers repeatedly emphasized during Wednesday’s debate was the need to keep up with China’s massive investments in cutting-edge technology. “This bill will unleash private sector innovation while significantly boosting federal national security investments,” Young said in written remarks Wednesday following the vote. “It’s been a long journey to get to this point, but history will show that by passing this bill, we are confronting the challenges of today and building a prosperous and secure tomorrow for all Americans.” Sen. Roger Wicker, R-Miss., said: “Regrettably, we are not in the driver’s seat on a range of important technologies. China is.” Congress, he said, now has “a chance to move us back in the right direction and put America back into a place to win the game.” The bill provides more than $52 billion in grants and other incentives for the semiconductor industry as well as a 25% tax credit for those companies that invest in chip plants in the U.S. It calls for increased spending on various research programs that would total about $200 billion over 10 years, though Congress will have to follow through by approving that money in future spending bills. Despite years of work, the bill’s future did not look so promising about a month ago. That’s when Senate Republican leader Mitch McConnell tweeted that there would be no chips legislation as long as Democrats pursued a party-line package of energy and economic initiatives. GOP support is critical in the Senate to get the 60 votes needed to overcome a filibuster. But when Sen. Joe Manchin of West Virginia quashed the idea of imposing higher taxes on the rich and corporations, key Republicans said that was an opening to go forward on semiconductors. Meanwhile, the Biden administration pushed to get a bill passed before the August recess, even if meant considerably narrowing the focus to just the $52 billion in semiconductor incentives. Commerce Secretary Gina Raimondo told lawmakers behind the scenes and publicly that semiconductor companies were making plans on how to meet the increased demand for chips. She said the growth in the industry would move forward with or without the United States and if lawmakers didn’t act quite soon, those companies would simply choose to build in other countries offering significant financial incentives. Schumer said that after McConnell’s statement, he called the CEOs of chipmakers and companies such as General Motors and Ford and reached out to “unlikely allies” like the U.S. Chamber of Commerce and the Business Roundtable. He urged them to reach out to Republican senators about the importance of the bill. “And they changed things,” Schumer told The Associated Press. “They really, for the first time, industry really helped a good government program.” The House could take up the bill as soon as Thursday. While most Republicans are expected to oppose it, some of the ranking Republicans on committees dealing with national security — Reps. Michael McCaul of Texas, Michael Turner of Ohio and John Katko of New York — support the measure. So do many of the Republicans on a bipartisan group called the Problem Solvers Caucus, which is made up of moderates from both parties. Governor Eric Holcomb celebrated the vote in a written statement and urged the House to follow suit. “If the U.S. wants to be a leader in 21st Century industries, semiconductors must be our first objective,” Holcomb said. “Members of the U.S. House should vote yes and make this investment, which includes comprehensive oversight responsibilities to ensure taxpayer dollars are invested wisely.” SkyWater Chief Executive Officer Thomas Sonderman said if the bill is signed into the law, the company would immediately begin the application process for funding. He says the plan is for federal and state funding to pay for two-thirds of the West Lafayette facility.