Jul 29, 2022 3 min read World News

Congress Passes CHIPS Act to Compete with China by Investing in Cutting-Edge Technologies

The $280 billion Chips and Science Act will subsidize domestic semiconductor manufacturing and invest billions in science and technology innovation to strengthen the United States’ competitiveness.

The Senate on Wednesday passed an expansive $280 billion bill aimed at building up America’s manufacturing and technological edge to counter China, embracing in an overwhelming bipartisan vote the most significant government intervention in industrial policy in decades, writes The New York Times.

"No country’s government — even a strong country like ours — can afford to sit on the sidelines," Senator Chuck Schumer, Democrat of New York and the majority leader who helped to spearhead the measure, said in an interview. "I think it’s a sea change that will stay."

Senate Passes $280 Billion Industrial Policy Bill to Counter China (The New York Times)

Excerpt from The New York Times: The legislation reflected a remarkable and rare consensus in a polarized Congress in favor of forging a long-term strategy to address the nation’s intensifying geopolitical rivalry with Beijing. The plan is centered around investing federal money into cutting-edge technologies and innovations to bolster the nation’s industrial, technological and military strength. The measure passed 64 to 33, with 17 Republicans voting in favor. The bipartisan support illustrated how commercial and military competition with Beijing — as well as the promise of thousands of new American jobs — has dramatically shifted longstanding party orthodoxies, generating agreement among Republicans who once had eschewed government intervention in the markets and Democrats who had resisted showering big companies with federal largess.

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According to TechCrunch, the bill is a reaction to the on-going global chip shortage, itself a result of a confluence of international crises, including the pandemic, tense U.S.-China relations, extreme weather phenomena and the on-going Russia-Ukraine War. Those factors, combined with the manufacturing’s concentration in Asia (specifically Taiwan), have led to shortages in the chips that power everything from phones to cars.

"We are moving forward on the Senate CHIPS bill," Senate Majority Leader Chuck Schumer said in a statement tied to the vote. "It’s going to take aim at the national semiconductor chip shortage, lower costs for American consumers, and boost scientific innovation and jobs."

Senate passes CHIPS Act to subsidize domestic semiconductor production (TechCrunch)

Excerpt from TechCrunch: President Joe Biden has been a staunch supporter of the bill, virtually meeting with several CEOs earlier this week due to his COVID-19 diagnosis. Earlier this morning, the President tweeted, "Semiconductor chips are the building blocks of the modern economy – they power our smartphones and cars. And for years, manufacturing was sent overseas. For the sake of American jobs and our economy, we must make these at home. The CHIPS for America Act will get that done."

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The House is likely to approve the funding by the end of the week, and President Joe Biden is expected to sign the legislation soon afterward. But while its biggest champions have connected the CHIPS Act to the ongoing chip shortage, the legislation won’t really help, at least in the short term, reports Vox.

The CHIPS Act won’t solve the chip shortage (Vox)

Excerpt from Vox: The bulk of the CHIPS Act is a $39 billion fund that will subsidize companies that expand or build new semiconductor manufacturing facilities in the US. The Commerce Department will determine which companies receive the funding, which will be disbursed over five years. More than $10 billion is allocated to semiconductor research, and there’s also some support for workforce development and collaboration with other countries. The bill also includes an extensive investment tax credit that could be worth an additional $24 billion.

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UPDATE: On Thursday, the House passed the CHIPS legislation on a 243-187 vote, with strong bipartisan support — despite a last-minute push by House GOP leaders to whip against the bill. Twenty-four Republicans defied the leadership and joined Democrats in backing the measure, according to The Washington Post.

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