The Senate voted in favor of a limited version of its bill designed to boost U.S. Semiconductor competition with China. The bill cleared a key procedural hurdle Tuesday night with a 64-34 vote, even as lawmakers worked to finalize various parts of the legislation. The bill, which would provide about $50 billion in subsidies to boost U.S. computer chip manufacturing, is a multifaceted bipartisan effort that combines the interests of several committees, ranging from national security to finance. The Senate’s procedural step forward on Tuesday paves the way for a final vote later this week or early next week. The bill will then go to the House for a vote before heading to President Joe Biden’s desk for signature. The broader goal of the legislation is to incentivize U.S. semiconductor production to reduce reliance on Asian-based manufacturers. Biden administration officials say a larger domestic chip industry would help ease supply chain disruptions that have hampered the economic recovery from Covid-19 and isolate the US from supply routes dominated by political rival China. A global chip shortage over the past two years has rippled through many industries, including automakers, cellphone and consumer technology companies, and defense systems makers. Sen. John Cornyn, R-Texas and lead author of the original Senate text, highlighted the economic impact of the legislation in a pair of Twitter posts published Tuesday. US Senator John Cornyn (R-TX) speaks to reporters at the US Capitol in Washington, DC. Jon Cherry | Reuters “If the US loses access to advanced semiconductors (none made in the US) in the first year, GDP could shrink by 3.2 percent and we could lose 2.4 million jobs,” he wrote. “The GDP loss would be 3 times greater ($718 billion) than the estimated $240 billion of US GDP lost in 2021 due to the ongoing chip shortage.” The centerpiece of the legislation is $52 billion to rebuild domestic chip production and tax breaks to encourage factory construction as U.S. chip stocks rose on Tuesday ahead of the expected vote, with Intel rising 3 .9%, Nvidia 5.5% higher and Texas Instruments up 3.1%, all ahead of the broader S&P 500’s 2.8% gain. The procedural step forward comes more than a year after the Senate in a bipartisan vote first approved a $250 billion bill to boost US chip manufacturing and boost American research and development. But the House never took up that legislation after the Senate approved it in June 2021. House Democrats drafted their own version of a China competition act, with a softer national security tone and a stronger emphasis on climate change funding. Republicans opposed the bill. Democrats in both chambers have tried for months to reconcile the differences between the two versions. With annual inflation topping 9 percent and the party gearing up for tough midterm elections, the Biden administration suggested it would pass a simpler bill aimed simply at expanding chip production.
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Read more about CNBC’s political coverage: It is uncertain whether Senate Democrats will be able to muster the 60 votes needed to override a final legislation. Doing so would require support from several Republicans, who have expressed regret that much of their work to create provisions to compete with China will likely be rejected. Even top Democrats, including Foreign Relations Committee Chairman Bob Menendez of New Jersey, have decried the watered-down bill. “We’re now at a point where I don’t think anybody really knows what the final bill might look like or where the votes are,” Republican Senate Whip John Thune, RS.D., told Politico last week. “We know where the votes were last time. But that was a different time and it was a different bill than what we’re talking about today.” But Democrats also have newer issues with Republicans, who have threatened to derail the semiconductor bill if Majority Leader Chuck Schumer, D-N.Y., continues to pursue a separate plan to pass a tax bill and climate policy. Other late-stage policy decisions could further complicate matters, including whether to reduce tariffs on Chinese goods first imposed by former President Donald Trump.
