Senate approves bipartisan semiconductor bill that could bring funds to California

After months of wavering, the Senate on Wednesday approved a sweeping $280-billion plan to subsidize domestic semiconductor manufacturers and fund research that a bipartisan group of lawmakers hopes will shore up U.S. competitiveness, particularly against China.

Democrats hailed the bill as a historic level of investment in scientific research and a step toward rebuilding domestic supply of chips, which are needed to produce cars, computers, household appliances and the military’s advanced weapons systems.

The pandemic has exposed the pitfalls of relying on foreign manufacturing, prompting price hikes in products that rely on semiconductors and national security worries about being beholden to those foreign supply chains.

“This bill is going to cut costs for people, it’s going to bring jobs home and it’s going to strengthen our national security,” said Sen. Debbie Stabenow (D-Mich.). “It’s a big deal.”

A top priority of the Biden administration, the bill was approved 64 to 33 with the support of most Democrats and 17 Republicans. Sen. Bernie Sanders (I-Vt.), who caucuses with Democrats, opposed the bill and three senators did not vote.

Biden called it a “historic bill that will lower costs and create jobs. As Americans are worried about the state of the economy and the cost of living, the CHIPS bill is one answer: It will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers.”

The acronym stands for Creating Helpful Incentives to Produce Semiconductors.

The bill now goes to the House, where it has support from Speaker Nancy Pelosi (D-San Francisco) and several senior Republicans, and could be taken up as soon as this week.

The bill has been on a fraught, albeit bipartisan journey for more than a year.

Originally a much more ambitious economic-competitiveness effort that passed the Senate last summer, the bill has been slimmed down.

Senate Minority Leader Mitch McConnell (R-Ky.) recently threatened that Republicans wouldn’t support the effort if Democrats pursued another Democrats-only bill of social changes and spending. And it has gone through a half-dozen names to reflect the changes, with Senate Majority Leader Charles E. Schumer (D-N.Y.) finally landing on the Chips and Science Act.

Schumer, one of the bill’s original backers, acknowledged that the legislation isn’t flashy but said its long-term investments in scientific research make it “one of the most consequential bipartisan achievements of this Congress.”

“It’s not one of these things that people immediately say, ‘Oh, yes, we must have that done.’ But it is something we must have done,” he said.

The bill would provide about $52 billion in grants and tax breaks to computer chip manufacturers that expand their plants or build new ones in the United States. About 40% of the world’s chips used to be made domestically, but now it is about 12%, according to the bill’s proponents. An additional $200 billion would fund new scientific research over the next decade.

California stands likely to benefit from the legislation. According to U.S. Bureau of Labor Statistics data compiled by the Semiconductor Industry Assn., the state leads the country with 64,000 total semiconductor jobs and 643 semiconductor establishments, including industry giant Intel. Semiconductors are the state’s top export by value.

The governor’s office has hopes that some of the manufacturing funding will be headed its way.

In April, the state gave Applied Materials Inc., a Santa Clara, Calif., company that manufactures equipment used to make chips, a $30-million grant in exchange for the company’s promise to invest $2 billion to develop improved manufacturing equipment and create at least 683 full-time jobs. The Governor’s Office of Business and Economic Development said the grant would be “vital to Applied Materials’ ability to secure federal CHIPS Act funding,” referring to the bill under a prior name.

The bill’s funding for science research — particularly fusion research — could prove important to the nation’s laboratories, four of which are in California.

Sen. Dianne Feinstein (D-Calif.) said the bill would be a “boon” for the state’s tech industry. “I’m hopeful that manufacturing funds will end up in the state that continues to lead the world in innovation,” she said. “California’s highly skilled workforce and cutting-edge industry makes it uniquely positioned to establish manufacturing operations, building on the state’s strong record in driving the global high-tech economy.”

The effort is not without its detractors. To Sanders and some conservatives, it amounts to corporate welfare.

“Should American taxpayers provide the microchip industry with a blank check of over $76 billion at a time when semiconductor companies are making tens of billions of dollars in profits and paying their executives exorbitant compensation packages? I think the answer to that question should be a resounding no,” Sanders said on the Senate floor.

He chastised Intel in particular for laying off about 1,400 workers from a New Mexico chip facility and 1,000 from an Oregon plant, and sending those jobs to Israel.

The bill’s proponents say the U.S. needs to support chip producers because other countries are doing so. But to the bill’s detractors, the U.S. is merely rewarding bad behavior by companies that moved jobs overseas.

“These same companies are in line to receive a massive taxpayer handout to undo the damage that they did,” Sanders added. “That is simply unacceptable.”