US Senate Passes $280 Billion CHIPS Act for Domestic Semiconductors

US Senate Passes $280 Billion CHIPS Act for Domestic Semiconductors
Senate Majority Leader Chuck Schumer, (D-N.Y.), speaks alongside a bipartisan group of senators, including (L-R) Sen. Roger Wicker (R-Miss.), Sen. Mark Warner (D-Va.), Sen. Todd Young (R-Ind.), and Sen. Maria Cantwell (D-Wash.) following the passage of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act on July 27, 2022 in Washington (Nathan Howard/Getty Images)
Andrew Thornebrooke

The U.S. Senate has approved a measure designed to encourage more companies to build semiconductor plants in the United States.

The legislation, which passed on a 64–33 vote on July 27, would provide $280 billion in funding to prop up and kickstart domestic semiconductor manufacturing and research; the price tag is far above previous legislation that aimed to provide just $52 billion to manufacturers. The bill now moves to the House for debate.

Officially dubbed the CHIPS [Creating Helpful Incentives to Produce Semiconductors for America] Act of 2022, the measure would provide tens of billions of dollars in subsidies and tax breaks to technology corporations in an effort to spur new market growth, as well as funding for government-backed tech research.

Proponents of the legislation have long said that it's necessary in order to maintain a competitive edge with China, which is pouring money into its own domestic chip production.

At the last minute, however, Senate Majority Leader Chuck Schumer (D-N.Y.) stripped a provision that would have blocked manufacturers from using technology developed with funding from outsourcing production to China. As a result, firms will be able to domestically research and create new semiconductor technologies using taxpayer funds, then outsource the manufacturing of those semiconductors to China.

Critics from both sides of the aisle, including Sens. Mike Lee (R-Utah) and Bernie Sanders (I-Vt.), criticized the legislation as a corporate handout that will increase inflation and hurt U.S. taxpayers.

"Bernie Sanders and I almost never agree but he is right about so-called CHIPS bill," Sen. Chuck Grassley (R-Iowa) wrote on Twitter. "It's just a huge govt handout to massive [and] already-profitable companies. Why would we spend more taxpayer dollars for unnecessary corporate welfare?"

Semiconductors, which are used in the production of everything from personal computers to hypersonic missiles, have become a key point of anxiety over the past two years as a global supply chain crisis has wreaked havoc on the United States' ability to obtain the chips.

The new CHIPS Act follows a version of the measure that was approved in January 2021. Since then, Democrats and Republicans have failed to reach an agreement on how to appropriate funding for the initiative, with Republicans pushing for new corporate tax credits and Democrats pushing for green energy and research funding to be included.

That stalemate led to the creation of two stalled pieces of legislation, the Republican-backed U.S. Innovation and Competition Act and the Democratic-backed America COMPETES Act, which were combined into the new CHIPS Act of 2022.

Andrew Thornebrooke is a national security correspondent for The Epoch Times covering China-related issues with a focus on defense, military affairs, and national security. He holds a master's in military history from Norwich University.