Senate seeks $52 billion to boost US chip production

Federal money would help build and modernize semiconductor plants in the US

Stacks of computer chips

Senate Majority Leader Chuck Schumer announced the US Senate has proposed spending $52 billion to boost domestic chip production over the next five years. 

The federal money is part of bipartisan legislation unveiled late Tuesday that proposes spending $120 billion overall on tech manufacturing and research to compete with China more effectively. 

“This legislation will allow the United States to out-compete countries like China in critical technologies like semiconductors, create good-paying American jobs, and help improve our country’s economic and national security,” Schumer said in a statement.

According to Reuters and Bloomberg, the Senate legislation would launch a federal initiative to financially support building, expanding and modernizing semiconductor fabrication plants in the US. 

This financial support would include spending $39 billion on production and R&D incentives, $10.5 billion on programs such as the National Semiconductor Technology Center, and $1.5 billion on accelerating the development of a US-based open-architecture network-sharing model (OpenRAN) as an alternative to tech supplied by Chinese manufacturing giants Huawei and ZTE. 

The legislation would also include significant federal incentives to enhance tech R&D at American universities and institutions over the next five years.

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The Senate will take up this legislation beginning this week. The House will consider similar legislation. Any bill that eventually makes its way to the White House would likely be some combination of the two.

Meanwhile, President Joe Biden has already asked Congress for $50 billion to fund the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, which would use federal money to build more chip manufacturing capacity in the US.

The Semiconductor Industry Association (SIA) warns that the US share of global semiconductor manufacturing capacity has decreased from 37% to 12% since 1990. This is primarily due to government subsidies in other regions and stagnation in federal investment.

This comes during a global semiconductor shortage that experts anticipate will last at least through 2021, if not longer. The COVID pandemic contributed to the chip shortage, which has escalated recently and left automakers and tech manufacturers scrambling for supplies.

The Biden administration pledged to address the chip shortage and is working with businesses to fix bottlenecks in semiconductor supply. That development came after semiconductor industry leaders in the US wrote to the president, asking him to fund chip manufacturing and research in the administration’s economic recovery and infrastructure plan. 

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