Senate Bill to Boost Chip Production, Advanced Technology Set to Move Ahead

The bill “creates a comprehensive response to China’s growing technology dominance, which poses a massive threat to our national security,” said Sen.

Roger Wicker

(R., Miss.), one of the main GOP backers.

Its prospects in the House are less clear. Some Democrats and Republicans say prosperous tech companies don’t need taxpayer subsidies, with some Republicans also skeptical about taking a bill assembled mainly by Senate Democrats.

House leaders are optimistic they will be able to piece together their own bipartisan coalition to give final approval to the legislation and send it to President Biden before the August congressional recess.

“Once the Senate passes this urgently needed legislation, the House will swiftly send it to the president’s desk,” House Speaker

Nancy Pelosi

said.

The bill combines about $52 billion in subsidy funding to boost semiconductor production in the U.S., along with about $24 billion in advanced manufacturing tax credits that would also support the industry.

The package also would authorize about $200 billion in spending, mainly for federally backed scientific research over the next decade. It would fund about $1.5 billion for next-generation wireless research and establish new long-term policies for the nation’s space program.

Much of the science funding represents a compromise between earlier House and Senate science funding bills. There is even a section named for Rep.

Eddie Bernice Johnson

(D., Texas), the retiring chairwoman of the House Science Committee, underscoring the House’s behind-the-scenes influence on the Senate-written bill.

Supporters, including the Biden administration and the U.S. chip-making industry, say the legislation is needed because of the high cost of building advanced chip manufacturing facilities.

They say the investment is needed for the U.S. to maintain its technological edge and to prevent semiconductor production from becoming too concentrated in Asia, where there are geopolitical risks of supply disruption.

Mr. Biden spoke at a virtual event to boost the bill Monday, alongside top administration and industry officials. The CEOs of

Lockheed Martin Corp.

,

Medtronic

PLC, and

Cummins Inc.

backed the legislation as a way to secure future U.S. supplies of chips used in missiles, medical devices, and engines, respectively. The head of the Communications Workers of America union said he expected it to help create thousands of U.S. manufacturing jobs.

“America invented the semiconductor,” Mr. Biden said. “It’s time to bring it home for our security and economic growth.”

Opponents—who include Sen.

Bernie Sanders

(I., Vt.) on the left and Sen.

Pat Toomey

(R., Penn.) on the right—say big semiconductor companies don’t need so much help. Criticism of the tax breaks has been particularly fierce, because they were a last-minute addition to a bill that already offered large subsidies.

The science funding is aimed at boosting the U.S. government’s diminished standing in research spending, by some estimates at its lowest since before the space race of the 1960s. Cutting-edge areas expected to be affected include quantum computing and artificial intelligence.

The package’s phoenixlike revival in recent days came after Senate Republicans abruptly walked away from negotiations this summer. Republicans were unhappy that even as they were negotiating over the sprawling competitiveness bill, Democrats began simultaneously trying to revive a partisan package of climate spending and tax measures.

Senate Minority Leader

Mitch McConnell

(R., Ky.) signaled that he might be willing to accept a much-narrowed bill that included the semiconductor subsidies. That meant dropping the bulk of the bill’s spending measures, including for science.

In mid-July Senate Majority Leader

Chuck Schumer

(D., N.Y.) began telling colleagues that he would put such a chips-only bill on the floor the following week.

Meanwhile, the Democrats’ climate and tax package fell apart, after Sen.

Joe Manchin

(D., W.Va.) rejected it. That gave Senate Republicans the chance to quietly re-engage on the broader competitiveness package as well.

With the July 19 floor vote looming on Mr. Schumer’s chips-only package, backers of the broader science funding—spurred by recent national security briefings underscoring the need for more research funding—went to work to finalize a compromise proposal so it could be added to the suddenly fast-moving bill.

On July 17, aides to the Commerce Committee chairwoman, Sen.

Maria Cantwell

(D., Wash.) and Mr. Wicker, the panel’s top Republican, sat down to review a roughly 1,000-page draft of the proposed compromise page by page, to make sure its research language was agreeable to all sides, according to two people familiar with the matter.

Meanwhile, Mr. Wicker—usually a behind-the-scenes operator—was becoming increasingly vocal, saying he wouldn’t support the chips funding without the science provisions.

Mr. Wicker was particularly focused on securing changes to science funding formulas that would benefit more rural states like Mississippi. His stance raised doubts over whether Mr. Schumer’s narrower approach could even work.

Other longtime supporters, Sens.

Todd Young

(R., Ind.) and

Kyrsten Sinema

(D., Ariz.), organized a bipartisan meeting for about 20 senators in the Capitol last Monday, to gauge interest in expanding the package to include the science research and other measures including provisions for stepped-up security at research labs and funding for the National Aeronautics and Space Administration.

With final proposed language for the science portion in hand the following day, Mr. Young held a follow-up meeting with supportive Republicans. GOP backers began to feel confident that they could deliver as many as 15 Republican votes for the procedural vote on Mr. Schumer’s proposal, which had become a proxy for broadening the chips-only plan. They got 16.

The new package quietly drops a number of controversial proposals that had been adopted by the House or Senate. They include disputed measures on trade policy and banking, as well as a proposal to tighten security standards for some U.S. research.

Also dropped was a $45 billion spending proposal by the House to strengthen a range of U.S. supply chains for areas beyond semiconductors.

The package leaves out a proposal—opposed by some business groups—to require government review of certain U.S. outbound investments in China and other potentially unfriendly countries.

Write to John D. McKinnon at [email protected]