US lawmakers propose $32b in aid to spur home-grown chip factories

WASHINGTON • A bipartisan group of American lawmakers on Wednesday introduced a Bill to provide more than US$22.8 billion (S$31.7 billion) in aid for semiconductor manufacturers, aiming to spur the construction of chip factories in the United States amid a strategic technology rivalry with China.

Chip factories can cost up to US$15 billion to build, with much of the expense in the form of pricey tools.

The proposal would create a 40 per cent refundable income tax credit for semiconductor equipment, US$10 billion in federal funds to match state incentives to build factories, and US$12 billion in research and development funding.

It would authorise the Defence Department to use funding under the Defence Production Act to "establish and enhance a domestic semiconductor production capability".

While a network of "trusted foundries" exists in the US to help supply chips to the American government, many chips must still be sourced from Asia.

Republican Senator John Cornyn and Democratic Senator Mark Warner introduced the Bill in the Senate.

Aides to Republican Representative Michael McCaul and Democratic Representative Doris Matsui said the two planned to introduce a version in the House of Representatives yesterday.

While some US firms such as Intel and Micron Technology still make chips in America, the industry's centre of gravity has shifted to Asia, where Taiwan Semiconductor Manufacturing (TSMC) has more than half of the overall market for contract manufacturing chips and an even stronger hold on the most advanced chips.

Companies including iPhone maker Apple, Qualcomm and Nvidia all rely on TSMC and other Asian foundries to manufacture their chips.

The dual shocks of the coronavirus pandemic, which has disrupted chip supply chains, and Beijing's recent move to strengthen its control over Hong Kong, have prompted alarm in Washington over having advanced chip manufacturing concentrated in Taiwan.

Self-governed Taiwan, a US ally across a narrow strait from China, is regarded by Beijing as a renegade province awaiting eventual reunification with the mainland, by force if necessary.

The democratic island has spent billions of dollars bolstering its domestic chip manufacturing industry. TSMC last month said it plans to build a factory in Arizona.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 12, 2020, with the headline 'US lawmakers propose $32b in aid to spur home-grown chip factories'. Print Edition | Subscribe