House and Senate Tackle Semiconductor Chip Shortages and Seek to Boost U.S. Production

How COVID and supply chain woes are driving $52 billion in incentives for domestic production of semiconductor chips.

House and Senate Tackle Semiconductor Chip Shortages and Seek to Boost U.S. Production
Photo of Intel CEO Pat Gelsinger courtesy Web Summit

WASHINGTON, April 21, 2022 – Lawmakers on both sides of the aisle in Washington have made explicit the need to tackle the supply chain crisis and semiconductor shortage by introducing and pushing forward separate pieces of legislation that emphasize more domestic autonomy. But the path of these pieces of legislation isn’t exactly cut-and-dried.

Despite a key bill that would make available $52 billion in incentives for the domestic production of semiconductor chips – critical for computers, cars and networking equipment – passing both chambers, one key Republican said his party has been largely shut out of contributing to the language of the legislation.

Representative John Curtis, R-Utah, a member of the House Energy and Commerce Committee, told Broadband Breakfast this month that Republicans have been shut out of legislative discussions for the past year as the Democratic party has enjoyed a majority in the House and the Senate.

Curtis, who is also head of the Conservative Climate Caucus, said he has yet to be approached by the White House on what seems to be a larger piece of the Biden policy plan for semiconductor and supply chain independence.

This sentiment among House Republicans has created friction as the bill heads to conference committee, which is designed to bring both parties to the table to hammer out language they can agree on before it goes to the president for signing.

Conferees were appointed by House Speaker Nancy Pelosi, D-Calif., on April 7, just before the House began its Easter break. Sorting out difference between the House-passed and Senate-passed versions is likely to be one of the first items of business when representatives return to Washington next week.

Broadband Breakfast has been following the intertwining issue of the supply chain crisis and the U.S.’s ambitions to be more independent when it comes to producing the chips needed to power the future.

As the Covid-19 pandemic has held up key supplies in foreign lands and as domestic law and policy have moved to shore up national security by banning Chinese-made products from the country’s networks and more, this publication will outline the key bills that both chambers are mulling over.

The U.S. Innovation and Competition Act, and the COMPETES Act

The first of these bills is the United States Innovation and Competition Act, S.1260. Passed by the Senate in June 2021 with a margin of 68-32, this bill provides funding through fiscal year 2026 to support domestic semiconductor manufacturing, research and development and supply chain security. It also targets funding for wireless supply chain innovation.

The initial goal was for this bill to go to the House for votes, but the House instead presented a bill with similar goals – the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022 (America COMPETES Act of 2022, H.R. 4521) – which was introduced in the summer of 2021.

It passed the House on February 4 by a margin of 222-210, demonstrating the tension between the parties, and then passed the Senate in late March by a 68-28 spread.

The Competes Act must now go to the aforementioned conference committee to iron out the party differences. After that is done, the bill will make another voting trip through both chambers and, if successful, out to the president for signing.

“Over the past year, the House and Senate have acted independently to pass their own versions of competitiveness legislation,” Senate Majority Leader Chuck Schumer, D-N.Y., said on March 17, as he addressed the Senate. “To reconcile the differences between these bills, both chambers must enter a conference before we send the final product to the president’s desk.”

The CHIPS funding proposal

The separate bills have common ground in that they both call for injecting $52 billion over five years into the Creating Helpful Incentives to Produce Semiconductors (CHIPS) For America Fund, a Treasury Department coffer that was created through the 2021 National Defense Authorization Act.

That money will be divided into a $39-billion financial incentives program and an $11-billion research and development program.

Mike Molnar, the founding director of the Advanced Manufacturing National Program Office, which is responsible for the Manufacturing USA program, said during a question-and-answer session about the CHIPS program Tuesday that the money is “not too much” and that both the incentives program and the R&D program must be paired for their goal to be achieved.

The federal government has been fielding comments since January about the makeup of the program, which will go toward producing chips and semiconductors that may otherwise be imported from countries like Taiwan, China, and South Korea.

Pressure mounts for some form of legislation

In March, a Senate Committee on Commerce, Science, and Transportation heard that only 12 percent of chip manufacturing occurs in America, and 6 percent of that comes from Intel. However, while Intel – which appeared with three other technology companies at the hearing – has remained primarily U.S.-based, Intel CEO Pat Gelsinger said that other countries can make the same chips it makes for 30-80 percent cheaper.

Intel is currently scheduled to break ground this year on a $20 billion semiconductor manufacturing “mega-site” in rural Ohio.

Gelsinger also shared that many overseas companies have government subsidies and incentives, which makes it easier and cheaper for them to make the chips. He said this is a key reason why Congress needs to pass the competitive legislative bill with the CHIPS funding included in the final product.

In February of 2021, President Joe Biden signed the executive order on America’s supply chains to begin efforts to restore America’s supply chains, and this past February, exactly one year later, the administration released a comprehensive plan based on the results of their work correlated with the executive order.

The report evaluated the current state of the supply chain, including as it affects technology, how the U.S. can develop its own manufacturing assets, where those assets would fit in the current supply chain, and how it would affect competition.

It’s reports such as those that add credence to lawmakers pushing for funding pieces such as those under the America COMPETES Act, which may still have some ways to go before the president himself can approve it.

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