Bipartisan Bill Seeks to Boost Domestic Manufacture of Semiconductors

A silicon wafer is displayed during a technology event in San Jose, Calif, on March 23, 2011. (Justin Sullivan/Getty Images)

A bipartisan group of senators has introduced a bill that would strengthen U.S. semiconductor supply chains by incentivizing domestic manufacturing of this key technology and “stop China from winning the race to produce these chips.”

The bill, called the Facilitating American-Built Semiconductors (FABS) Act (pdf), seeks to push back against the trend that has seen the United States’s share of global semiconductor production fall from 37 percent in 1990 to just 12 percent today.

“As much as 70 percent of the cost difference for producing semiconductors overseas is driven by foreign subsidies, rather than comparative advantages,” the senators wrote in a June 17 release. “The senators’ bill would close that gap by incentivizing production of semiconductors in the United States.”

The legislation aims to amend the Internal Revenue Code of 1986 to establish a semiconductor manufacturing investment credit.

“Our bill would provide a significant investment tax credit to companies that build chips here at home, rather than overseas,” said bill co-sponsor and Senate Finance Committee Chair Ron Wyden (D-Ore.), in a statement.

“The United States can’t allow foreign governments to continue to lure companies’ manufacturing overseas, increasing risks to our economy and costing American workers good-paying jobs,” Wyden added.

Sen. Ron Wyden (D-Ore.) speaks during a hearing in Washington, D.C., on June 30, 2020. (Susan Walsh/Pool/Getty Images)

According to the text of the bill, the tax credit for any given taxable year would be 25 percent of an investment in a semiconductor manufacturing facility, and another 25 percent for investments in semiconductor manufacturing property.

“As we’ve seen amidst the global semiconductor shortage, this supply chain is both absolutely essential and increasingly vulnerable,” Sen. John Cornyn (R-Texas), who co-sponsored the bill, said in a statement. “This legislation would help us bring semiconductor manufacturing back to U.S. soil, secure future leadership in semiconductors, and stop China from winning the race to produce these chips.”

Sen. John Cornyn (R-Texas) walks through the Senate subway on his way to a vote at the U.S. Capitol in Washington, D.C., on May 27, 2021. (Drew Angerer/Getty Images)

Besides incentivizing the production of semiconductors themselves, the bill also includes incentives for the production of specialized tooling equipment required in chip production.

The other co-sponsors are Sens. Mike Crapo (R-Idaho), Mark Warner (D-Va.), Steve Daines (R-Mont.), and Debbie Stabenow (D-Mich.).

The FABS Act proposal comes on the heels of a 100-day supply chain review (pdf) directed under President Joe Biden’s Executive Order 14017, “America’s Supply Chains.”

The report calls for a number of measures to address the current semiconductor shortage, including incentivizing American chip manufacturing via federal financial assistance, providing R&D resources to help bring emerging technologies from lab to market, boosting the talent pool of potential employees in the semiconductor industry, and protecting the U.S. technological advantage in chipmaking by enhancing export controls over key technologies.