Taxpayer cash infusion for the semiconductor industry survives crucial test vote in Senate

A bill to boost the nation’s semiconductor business passed a key test vote Tuesday after the Biden administration and industry officials urged Congress to approve legislation that will help counter China’s emerging dominance in producing computer chips.

Senate lawmakers voted to begin considering legislation that would provide subsidies and an investment tax credit to U.S. semiconductor manufacturers, which lawmakers say are falling behind global competitors, particularly China.

The Innovation and Competition Act, priced Tuesday at $76 billion, is a pared-down version of a broader bill that would have provided additional money for scientific research and technological innovation aimed at improving U.S. competitiveness with China. 

Senate Majority Leader Charles E. Schumer, New York Democrat, said he will expand the measure with an amendment that would authorize roughly $100 billion for research and innovation if Republicans vote in significant numbers to advance the subsidies and tax credit bill. 

More than a dozen GOP lawmakers voted for the bill, signaling to Mr. Schumer that he would have a filibuster-proof majority to pass an expanded measure.

The vote followed weeks of bipartisan negotiations and a threat from Senate Minority Leader Mitch McConnell, Kentucky Republican, who said the GOP would block the semiconductor measure if Democrats took up a separate spending bill that would raise taxes and implement green energy provisions. That measure was sidelined last week due to opposition from Sen. Joe Manchin III of West Virginia, a moderate Democrat, paving the way for Republicans to vote on the semiconductor bill.

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Mr. McConnell called the U.S. chip manufacturing deficit “a national security issue of significant proportion,” but said he would not vote to begin debate on the bill because Mr. Schumer intends to expand it.

“I’m not going to vote to proceed until we know what we are proceeding to,” Mr. McConnell said.

Democrats said the bill is urgently needed to bolster the semiconductor business in the U.S.  

“We have a chip shortage today and it is costing our economy and increasing inflation,” Sen. Maria Cantwell, a Washington Democrat and chair of the Commerce, Science and Transportation Committee, said. “If we do not start building here, we are not going to catch up.”

Some Republicans and a few Democrats said Congress should not be pumping billions of dollars into the lucrative semiconductor business.

“The bill isn’t needed to compete with China,” Sen. Mike Lee, a Utah Republican, said. “And it will set a precedent that other industries will follow: Anybody who can throw off a China competition angle will ask for money.”

The Senate voted to begin considering the bill following the urging of Biden administration officials, who warned businesses will go overseas to produce computer chips without government incentives.

“If Congress doesn’t act before they go home for the August recess, I think you will see these companies expand in other countries,” Commerce Secretary Gina Raimondo told Yahoo Finance last week. “And then we’re finished.”

Sen. John Cornyn, a Texas Republican, said the measure will include language requiring any U.S. company that accepts the subsidies to agree “not to invest in cutting-edge semiconductor manufacturing” in China for 10 years.





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