US Senate passes Bill for $72b shot in arm to semiconductor sector

WASHINGTON • The US Senate has passed sweeping legislation to subsidise the domestic semiconductor industry, hoping to boost companies as they compete with China and to alleviate a persistent shortage that has affected everything from cars and weapons to washing machines and video games.

The House of Representatives planned to vote yesterday on the long-awaited Bill after the Senate passed it on a 64-to-33 bipartisan vote. If approved as expected, President Joe Biden plans to sign it into law early next week.

The Chips and Science Act provides about US$52 billion (S$72 billion) in government subsidies for US semiconductor production and an investment tax credit for chip plants estimated to be worth US$24 billion.

The legislation would also authorise more than US$170 billion over five years to boost US scientific research to better compete with China.

Congress would still need to pass separate appropriations legislation to fund those investments.

"This legislation is going to create good paying jobs, it will alleviate supply chains, it will help lower costs, and it will protect America's national security interests," said the Senate's Democratic Majority Leader Chuck Schumer.

Senator Mark Warner said the Bill would help fund 10 to 15 new semiconductor factories.

"If we had not done this, there would not be another American semiconductor manufacturing plant ever built in this country," Mr Warner said.

Others noted that China had lobbied against the Bill.

"This is a bad day for President Xi (Jinping) and the Chinese Communist Party," said Senator John Cornyn. "The slumbering giant that is America has finally awakened to the challenge that we face from the People's Republic of China."

The Chinese Embassy in Washington said China "firmly opposed" the Bill, which it said was "entrenched in the Cold War and zero-sum game mentality and runs counter to the common aspiration of people from all sectors in China and the US to strengthen exchanges and cooperation".

In a regular press briefing, Chinese Foreign Ministry spokesman Zhao Lijian said of the Bill: "China is firmly against it. It is up to the US how it wants to develop itself, but it should by no means create hurdles for normal technological and people-to-people exchanges and cooperation with China, still less deprive China of or undermine China's legitimate development rights and interests.

"Imposing restrictions and seeking decoupling will only hurt others and oneself alike... No restriction or suppression will hold back China's sci-tech development and industrial progress."

US lawmakers said they normally would not support hefty subsidies for private businesses but noted that China and the European Union have been awarding billions in incentives. They also cited national security risks.

"What we became convinced of is there was a real problem here," said Senator Maria Cantwell.

"When faced with what is really a threat to the United States' competitiveness, we responded... There were people betting against us."

To spur Congress to act, Mr Biden and other supporters of the Bill cast the issue in national security terms, saying it was essential to ensure US production of chips crucial to a wide range of consumer goods and military equipment.

Senator Mark Kelly said that if the US lost access to chips made in Taiwan, it could shrink US gross domestic product by 10 per cent and cripple car production.

Mr Biden urged the House to quickly pass the Bill.

"As Americans are worried about the state of the economy and the cost of living, the Chips Bill is one answer: It will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers," he said in a statement after the Senate vote.

REUTERS