U.S. Senate votes to consider $52 billion in semiconductor funding

The U.S. Senate voted by a wide margin to begin debate on legislation to provide more than $52 billion in grants and incentives for the American semiconductor industry, a major milestone for the long-stalled package that proponents say is vital to national security.

The 64-34 procedural vote on Tuesday night met the criteria set by Senate Majority Leader Chuck Schumer to add research and development initiatives circulated by Republican Todd Young of Indiana and Democrat Kyrsten Sinema of Arizona to the legislation, which could be passed by the Senate next week.

Schumer before the vote called it “legislation our country desperately, desperately needs.”

Details of the bill, a scaled-down version of the original and more expansive measure intended to make the U.S. more competitive with China in technology and advanced manufacturing, are still being worked out.

In addition to money to assist semiconductor companies building fabrication plants or “fabs” in the U.S., a draft bill circulated by the Senate leadership includes a 25% investment tax credit for manufacture of semiconductors and tools to create semiconductors, $500 million for an international secure communications program, $200 million for worker training and $1.5 billion for public wireless supply-chain innovation.

The provisions proposed by Young and Sinema would establish a directorate for technology and innovation within the National Science Foundation to support basic and applied research and bolster education in science, technology, engineering and mathematics. Schumer had said the Senate needed at least 60 votes to show support for those provisions.

The legislation also would have to pass the House, where Majority Leader Steny Hoyer said Democrats would support the Senate version, even if some wanted a broader bill.

“We need to do the chips part and if we don’t do that we will lose chip manufacturing to other places,” he said.

Senate GOP leader Mitch McConnell, who had previously threatened to block the wider legislation until Democrats dropped their plans for a tax and climate package, voted against starting debate. He said earlier in the day that he wanted to see what is in the eventual legislation first, even though he called the domestic chip manufacturing “a national security issue of significant proportion.”

The Biden administration, lawmakers from both parties and the semiconductor industry have called the chips incentives urgent amid a global shortage and supply chain disruptions that have affected industries including automobiles, electronics and appliances. The U.S. still leads the world in chip design, but manufacturing has shifted to Asia. The legislation aims to bring more chipmaking back to the U.S.

Some companies, including Intel Corp., and a lobbying group, the Semiconductor Industry Association, have been seeking changes to the legislation to allow production of more advanced chips in China. The current language bans investment in plants that produce chips smaller than 28 nanometers while some facilities in the country are already producing 16 nanometer chips.

“Legislation this complex and important requires input from all stakeholders,” Intel spokesperson Nancy Sanchez said in an emailed statement. “Intel and many companies in our industry have come together with our trade association to provide input to policymakers in order to ensure that we have the best legislation possible and don’t inadvertently undermine the global competitiveness of companies that receive CHIPS funds.”