Senate Edges US Chip World Closer To $50b Subsidies By Passing COMPETES Act

The US Senate this week passed the America COMPETES Act by a bipartisan 68-28 vote, moving more than $50 billion in semiconductor industry funding closer to President Biden's desk. 

The Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022 – yes, COMPETES – mainly focuses on subsidies for scientific research and growing the US semiconductor manufacturing industry in a bid to improve the nation's chip design prowess, increase supply-chain resiliency, and stave off another semiconductor shortage. 

At more than 2,300 pages in length, the bill definitely has its fair share of riders, too: around 29 pages of items with reduced or suspended import duties, largely good news for Chinese companies, for example. Additional elements of the bill that favor China include addressing "diplomatic, security and other foreign relations matters."

There are some significant differences between the House and Senate versions of the bills, which will now have to be reconciled in conference before being sent to President Biden to be signed into law.

Regardless of what changes, the White House signaled its intent to support the draft law when Press Secretary Jen Psaki issued a statement praising its passage in the Senate on Monday.

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"The Senate took another step forward today in delivering on the President's vision to strengthen our supply chains, make more in America, and outcompete China and the rest of the world for decades to come," Psaki said. 

She added that the House and Senate bills are in line with President Biden's agenda of boosting domestic manufacturing and innovation while addressing supply chain bottlenecks. The House version, the America COMPETES Act, passed the House in February. The Senate version, the United States Innovation and Competition Act, passed the Senate last year. Now the Senate has OK'd the House text, so the two can go into the reconciliation process.

The Senate's text describes its specific goals as not only funding semiconductor production, but also includes provisions that:

• Mandate government action to address cybersecurity 
• Make "certain ecommerce platforms" liable for third-party trademark infringement
• Fund scientific research programs at the Office of Science and Tech Policy and Dept of Energy
• Fund education and workforce programs with a STEM emphasis

Critical sector supply-chain resilience; energy and wireless communications tech; and natural resource conservation are all also covered by elements of the bill. All in all, the funding and policy changes come down to making it easier for US companies to compete, both domestically and abroad. 

Where the chip money will go

The specifics for the semiconductor industry come in the form of the CHIPS for America Fund, which the bill doesn't create but provides cash for: CHIPS was established in the 2021 National Defense Authorization Act.

CHIPS creates funding for private companies to construct semiconductor fabs, as well as for businesses that want to expand or modernize their existing fabrication capabilities. Funding is also provided for the creation of a Manufacturing USA Institute operated by NIST for the purposes of developing semiconductor education programs, testing new chip assembly and packaging methods, and research virtualization and automation of semiconductor machinery maintenance. 

Funding for CHIPS distributes $50.2 billion between FY 2022 and FY 2026. The construction of semiconductor fabs is notoriously slow and expensive, and while the COMPETES Act may establish a course, it could take several years to see results in the form of chip supply chain resilience. ®