Computer chip subsidy bill to pass in Congress

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When the Senate passed a rare $52 billion bipartisan measure to subsidize computer chip manufacturing and research in the United States last summer, it seemed like an easy legislative priority for both parties.

Chips were so scarce that car factories shut down for weeks, threatening jobs and driving up prices. New cars became so rare that used cars skyrocketed in price, often exceeding what they cost when new. Manufacturers of seemingly everything, from products as diverse as smartphones and dog wash stalls, complained that they couldn’t get the chips they needed. The White House called several emergency meetings, and Republicans and Democrats quickly rallied.

But a year later, the funding is still not signed into law. Parliament took until February to approve the subsidies. Since then, the process of bringing together House and Senate bills has stalled over disputes over non-chip elements of the legislation, including climate regulations and trade with China. Myriad other issues, including military aid to Ukraine and gas price inflation, have also distracted lawmakers.

Proponents of chip funding say they are now trying to salvage it before Congress goes into its August recess, after which the election season is likely to stifle prospects for big new legislation.

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House and Senate leaders met Tuesday to try to negotiate a deal. They didn’t come out with an agreement on what to include in the final bill, but they did agree they must act quickly to prevent chipmakers from bypassing the United States and investing abroad, according to one with the talks trusted person who spoke on condition of anonymity to discuss sensitive negotiations.

“We have expressed our belief that there is no reason not to pass this legislation through Congress in July,” said House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Charles E .Schumer (DN.Y.). statement afterwards. “Democrats have already made arrangements to reach an agreement that we are optimistic can happen soon.” The Republican leadership did not immediately comment.

The problems that triggered the legislation in the first place are still pressing. A global shortage of computer chips continues to slow production in the US and other developed countries and drive up the prices of cars and other electronic goods.

Limited chip supply will continue to constrain car manufacturing into 2024 as vehicle demand pents up and the popularity of electric cars, which require more chips per vehicle, increases, consulting firm AlixPartners said on Wednesday.

House Democrats are eager to pass the bill because many members, including the most vulnerable swing district officials, believe it would help them argue that the party is tackling inflation and supply chain problems that are affecting the economy drive them.

US government subsidies would never provide a quick fix to the world’s chip deficit. Building a chip factory takes years. As chips, also known as semiconductors, have become an essential part of so much modern technology, many technology companies and lawmakers have argued that ensuring greater domestic production is a matter of economic and national security.

“Anything that has an on/off switch relies on a semiconductor chip,” Sen. Mark R. Warner (D-Va.), a leading supporter of the subsidy, said in an interview. “As we see now, with the shortage of these chips holding back the auto industry, the lack of a secure domestic supply chain will only exacerbate this problem as we move to more and more connected devices.”

The main reason for the shortage is that too few companies are willing to invest the $10 billion or more required to build a semiconductor fab. Countries around the world have thrown subsidies at these chipmakers in hopes of enticing them to locate new facilities within their borders.

Some of those programs could outperform the United States, Warner said. “A year ago, Europeans didn’t have a semiconductor subsidy program,” but Germany is now introducing subsidies for an Intel manufacturing facility, he said.

“If the German bureaucracy moves faster than the American legislative process, that’s not a good sign,” Warner said.

Intel announced plans in March to invest $20 billion in two chip fabs in Ohio, promising to start construction later this year and finish by the end of 2025. although some have said the speed of their investments will depend on the passage of the subsidy.

“The CHIPS Act makes the US semiconductor industry more competitive worldwide. For GlobalFoundries, the passage of the CHIPS funding would affect the speed and pace at which we invest in expanding our U.S. manufacturing capacity,” Steven Grasso, GlobalFoundries’ managing director of global government affairs, said in an email, referencing referring to the company’s plans for expansion into a location in Malta, NY, where initial approvals are pending.

In both the Senate and House of Representatives, funding is in broader bills aimed at boosting US economic competitiveness in the face of growing competition from China and other nations. Lawmakers say there is strong support in both houses for semiconductor subsidies and for increased spending on the National Science Foundation and other research efforts, but agreement on other policies is breaking down.

in the a letter Last week, the CEOs of more than 100 technology companies, including Microsoft, IBM and Google’s parent company Alphabet, urged Senate and House leaders to pass the bill, calling semiconductor funding and other manufacturing and research policies “vital to ours entire economy.”

“The rest of the world is not waiting for the US to act. Our global competitors are investing in their industries, their workers and their economies, and it is imperative that Congress act to improve US competitiveness,” they wrote in the letter Semiconductor Industry Association organized.

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Congressional aides said it’s likely the final bill will be more similar to Senate legislation because it passed with bipartisan support, while the House bill had only one Republican supporter, Rep. Adam Kinzinger (Ill.).

House Democrats had to make concessions on the trade and climate provisions they included in their bill along the way, said the person familiar with Tuesday’s congressional leadership meeting.

The expansion of the House of Representatives Trade Adjustment Assistance Programhelping workers who lose their jobs as a result of offshoring and other adverse effects of foreign trade is a particular non-starter for Republicans, congressional aides say.

Another provision sparking debate would require the federal government to review and temporarily ban certain US investments in China. The measure, proposed by Sens. Robert P. Casey Jr. (D-Pa.) and John Cornyn (R-Tex.), has some bipartisan support in both chambers, but was still “one of the more contentious issues to reach an agreement.” on,” said Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation.

Todd Tucker, director of industrial policy and trade at the Roosevelt Institute think tank, said the House bill included important provisions to protect U.S. supply chains from external shocks like the pandemic, which led to widespread shortages of medical supplies.

Among other things, the bill would create a $500 million Manufacturing Safety and Resilience Office at the Department of Commerce tasked with tracking real-time availability of goods and services and critical manufacturing in the United States and allied nations further, Tucker said.

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