U.S. Senate passes $76 billion in semiconductor subsidies

Washington — The U.S. Senate voted 64-33 Wednesday to approve $76 billion in subsidies for domestic semiconductor chip production. 

It's a step closer to what would be a major victory for American automakers seeking a more reliable source of chips, a component of modern vehicles that are even more crucial in electric vehicles. 

The bill must pass the U.S. House before reaching President Joe Biden, who has been a vocal proponent. 

The package would appropriate $39 billion in direct subsidies to chip companies planning to build or expand microchip manufacturing plants, including $2 billion for "legacy" chips used in autos. 

Companies conducting chip-related research and development would be eligible for $11 billion and another $2 billion would go to the Department of Defense to implement a network of chip prototyping centers. 

The bill also includes a 25% investment tax credit for investments in semiconductor manufacturing facilities or equipment, which a Senate Commerce Committee summary says would "completely erase" a 40% cost difference for advanced semiconductor production in the U.S. versus other countries. 

The nonpartisan Congressional Budget Office estimated the tax credit will cost more than $24 billion over the next decade. 

It also authorizes more than $100 billion over five years for research programs through the National Science Foundation, including regional technology hubs.

The legislation comes two years after auto companies first began shuttering plants and clogging parking lots with unsold cars as they waited on chips to complete their cars and trucks.

It also comes amid a period of increasing competition between the U.S. and China for global influence and economic prowess. Proponents argued the legislation is a necessary investment in America's future 

On the Senate floor Wednesday, Majority Leader Chuck Schumer, D-New York, praised the legislation as one of the "most significant long-term thinking bills we've passed in a long time."

"After years of hard work the Senate is passing the largest investment in science, tech and advanced manufacturing in decades," he said. "It will alleviate supply chains, it will help lower cost and it will protect America's national security interests."

Opponents of the legislation argued it represents a government handout to companies that don't need taxpayer support or that it didn't have strong enough safeguards to ensure the investment comes back to the public. 

The bill requires companies receiving subsidies to agree not to build new advanced chip manufacturing facilities in China or "other countries of concern" for 10 years. It also bars companies from using the money for stock buybacks or to pay shareholders. 

"The so-called guardrails would do nothing to prevent microchip companies from outsourcing a single job abroad," Sen. Bernie Sanders, I-Vermont, said Wednesday. "This language is totally meaningless."

Michigan Democrats and business groups praised the legislation's passage in statements Wednesday.

Gov. Gretchen Whitmer called it a "game-changing" bill that would support Michigan businesses.

Sens. Gary Peters, D-Bloomfield Township, and Debbie Stabenow, D-Lansing, both worked to secure set-aside funding in the bill for chips used in autos and released statements Wednesday touting the measure as job-creating policy that will improve national security. 

The Alliance for Auto Innovation, representing most major carmakers in the U.S., called the legislation "a smart investment in the future" and Autos Drive America, the leading advocacy organization for foreign automakers building cars in the U.S., said it provides "essential funding."

United Auto Workers President Ray Curry stressed the impact the chip shortage is still having on the industry and said the legislation is good for manufacturing workers. 

But he added that the UAW had hoped the bill would have included a reauthorization of Trade Adjustment Assistance funding, which provides help to workers who have been negatively affected by foreign trade. We "encourage the Senate take action to pass these provisions this year," he said. 

The chips legislation has bipartisan support in both chambers and is likely to pass the House. Speaker Nancy Pelosi, D-California, issued a statement Wednesday saying the lower chamber will "proudly pass this essential legislation" shortly. 

But some House Republicans on Wednesday lampooned the bill as out-of-control and unnecessary spending. 

"Congress needs to stop adding to the mandatory side of the ledger where there is less oversight and less control to rein in year-over-year spending growth," said Rep. Jason Smith of Missouri, the lead Republican on the House Budget Committee. 

rbeggin@detroitnews.com

Twitter: @rbeggin