Watched closely in Indiana, bill to boost semiconductor industry passes key Senate test

The Senate on Tuesday advanced a $280 billion bill designed to boost the semiconductor industry in the United States and to accelerate high tech research that backers say will be critical to the economy in future decades.

The bill has been closely watched in Indiana, where manufacturers, research universities and economic development officials are rooting for its passage. Republican U.S. Sen. Todd Young of Indiana has been closely involved in the legislation.

The Senate needed 60 votes to advance the bill and the vote was 64-32. The legislation is now on a glidepath to final passage in the Senate later this week. The House is also expected to take up the package this week.

The White House has led support for the bill, along with industry leaders who say government subsidies are necessary to compete with other nations that are also spending billions of dollars to lure manufacturers.

They say the pandemic has exposed the dangers to the economy and to national security of relying too heavily on foreign-made computer chips.

The bill provides about $52 billion in grants and other incentives for the semiconductor industry as well as a 25% tax credit for those companies that build chip plants, or fabs, in the U.S. The cost of the tax break is projected to be about about $24 billion over 10 years. The bill also authorizes about $200 billion to enhance scientific research over the same timeframe.

The Congressional Budget Office has projected that the bill would increase deficits by about $79 billion over 10 years. Critics have objected to the spending called for in the bill either as misplaced or excessive.

“At a time when the working families of this country are falling further and further behind while the very rich are getting much richer, let us get our priorities right,” said Sen. Bernie Sanders, I-Vt.

But the bill attracted support from lawmakers in both parties who say the investment is critical to U.S. innovation and staying ahead of economic rivals in coming decades, namely China.

“I firmly believe that passing this bill will be a turning point for American leadership in this century,” said Senate Majority Leader Chuck Schumer, D-N.Y. “The benefits of this legislation will reverberate across the country for years and decades to come.”

Indiana economic development leaders have been hoping for passage of the federal bill because the state would like to tap federal funding to land a $1.8 billion semiconductor plant at Purdue University.

Last week, Minnesota-based chipmaker SkyWater Technology and Purdue  said they intend to win part of the funding to help finance a proposed factory and research facility in West Lafayette.

In an interview, SkyWater chief executive Thomas Sonderman said the rough plan is for federal and Indiana state funding to pay for two-thirds of the factory, with the rest coming from SkyWater and its chip customers.

The facility would most likely make chips for the auto industry, medical device manufacturers, aerospace customers and the Department of Defense, he said.

Senate Republican leader Mitch McConnell led a group of 17 Republicans senators who voted to limit debate and advance the bill. While some Republicans have voiced concerns about the spending in the bill, others have emphasized the need to address national security vulnerabilities resulting from the U.S. reliance on plants in Taiwan and South Korea for the most advanced computer chips.

“We are not used to providing these kinds of financial incentives to businesses, but when it costs 30 percent less to build these manufacturing facilities across the seas in Asia and our access to that supply chain is potentially jeopardized by very real threats, it is a necessary investment for us to make,” said Sen. John Cornyn, R-Texas.