Congress OKs $280B to onshore chip production, research
WASHINGTON – This week, Congress passed a $280 billion bill that invests in the production of semiconductor chips here, with aims to counteract the growing reliance on Chinese manufacturing.
The CHIPS and Science Act, passed the Senate on Wednesday 64-33 with 17 Republicans joining Democrats in favor, is another instance of bipartisan success in an often bitterly divided Congress. In a 243-187-1 vote Thursday, the House of Representatives approved the measure, which had languished in different forms – including the House-approved COMPETES Act – for years even before the pandemic laid bare the need for such investments. In the end, 24 House Republicans defied leadership in joining Democrats in support.
President Joe Biden is expected to quickly sign the bill once it arrives at the White House.
A wide-ranging piece of legislation that moves between spending and policy, CHIPS would provide $52 billion in subsidies and additional tax credits to companies that manufacture chips in the United States – with five such factories already announced in Ohio, Texas, Arizona, Idaho and New York.
Another $200 billion would fund cutting-edge scientific research in areas like robotics and artificial intelligence. The U.S. Department of Commerce would receive $10 billion to create 20 “regional technology hubs” that would link research universities with private industry in areas that have been gutted by the impact of global production.
In Delaware, where chemical and advanced material research and production has long been a core industry and pharmaceutical development and production have quickly grown in recent decades, there is potential that universities and private companies could benefit from the federal research investments.
Many will surely benefit though from greater availability of future domestically produced semiconductor chips, or small components that manage the flow of electronics. They are ubiquitous in modern life, even if rarely seen, as they power smartphones, computers, home appliances, cars and more.
After the COVID-19 pandemic led to a drop in manufacturing production in Asia, and a boom in consumer spending arrived thereafter the supply of semiconductor chips fell significantly, leading to a shortage of goods, and contributing to a rise in inflation for a smaller number of them.
On Thursday, U.S. Sen. Tom Carper (D-Del.), who chairs the Senate Finance Trade Subcommittee that handles supply chain issues, spoke about how America has grown far too reliant on foreign companies’ production of the badly needed component.
“That’s increasingly a problem when America’s share of global chips production drops from 37% in 1990 to just 12% today, or when more than 75% of chips are manufactured in Asia. This reliance on foreign manufacturers makes our economic and national security vulnerable to geopolitical shocks halfway around the world,” he said.
In one of the most readily apparent impacts, semiconductor chips are a major hold up for new cars. There are about 20 to 30 needed per gas engine car, as the automotive industry is getting more high-tech. Semiconductor chips are used in blindspot detection systems, back-up cameras, collision sensors, radio touch screens, anti-lock brake systems, airbags and seat tensioners as well.
Semiconductor sales in cars are valued at $41 billion, and revenue grew about 30% in 2021 for that sector alone, according to a report from McKinsey & Company. But the lead times for chip production can exceed roughly four months.
That’s contributed to a shortage of new cars available at Delaware dealerships like Willis Chevrolet Buick in Smyrna, which U.S. Rep. Lisa Blunt Rochester (D-Del.) visited last month to get a look at the problem.
“Having worked on these issues for well over a year, today, I proudly voted to fix our broken supply chains and bring good-paying manufacturing jobs back to America,” the congresswoman said in a statement after Thursday’s vote. “I’m proud that the House & Senate could come together – working bipartisan and bicameral to pass a bill that will bolster our American economic engine for decades to come. There’s still more work to do to prevent future supply chain disruptions – and I believe the work of the conference committee must continue to create the Office of Manufacturing Security and Resilience that I proposed in the Building Resilient Supply Chains Act – but the CHIPS & Science bill is an important milestone and a badly needed measure that will spur innovation and lower the cost of living for Americans.”
Even more importantly than consumer goods though, Carper noted that chips are needed to power medical equipment, including the mammography machines made by Hologic in Glasgow.
“For Hologic, a shortage of chips means not just slower production of new mammography machines, but a struggle to replace and repair old machinery that women across our country rely on for vital preventative care to detect breast cancer,” Carper said in a speech on the Senate floor Thursday. “After more than two years of this pandemic, and cancer screenings are all too often delayed for months, that means more clinics and doctors’ offices with outdated equipment will offer limited screenings. And, that means more women in states like mine and across America will have to put screenings that could save their lives on the backburner.”
Carper agreed with Blunt Rochester that there are more measures to be considered to improve U.S. competitiveness on the global supply chain.
“When America isn’t in the driver’s seat, someone else is taking the wheel. And, Americans may well fall behind as a result,” he said. “So, we have not just an opportunity, but an obligation to American consumers and to our nation’s workforce to invest here at home.”