On Wednesday, 7/28/22 In a 64-33 vote, the Senate passed the $280 billion Chips and Science Act of 2022.

UPDATE Per Reuters – Thursday, 7/28/22 @ 4:15 PM: “The U.S. House of Representatives passed sweeping legislation on Thursday to subsidize the domestic semiconductor industry as it competes with Chinese and other foreign manufacturers, sending the bill to the White House for President Joe Biden to sign into law.”  (3)

Watch Commerce Committee Chair @SenatorCantwell, Senate Majority Leader @SenSchumer, Commerce Committee Ranking Member @SenatorWicker, and Sens. @MarkWarner, @SenToddYoung and @JohnCornyn on the Final Vote On the Chips and Science Act https://t.co/suJMAPl8qQ

— Senate Commerce, Science, Transportation Committee (@commercedems) July 27, 2022

As reported by the Wall Street Journal and Yahoo Finance:

• “In a 64-33 vote, the Senate passed the $280 billion “Chips and Science Act,” the final iteration of a bill that was years in the making.
• About $52 billion would go to microchip manufacturers to incentivize the construction of domestic semiconductor fabrication plants.
• The bill also includes about $100 billion in authorizations over five years for programs such as expanding the National Science Foundation’s work and establishing regional technology hubs to support start-ups in areas of the country that haven’t traditionally drawn big funding for tech.
• In a White House meeting with business and labor leaders Monday, Commerce Secretary Gina Raimondo noted that the United States used to make 40 percent of the world’s chips but now makes about 12 percent — and “essentially none of the leading-edge chips,” which come almost entirely from Taiwan.
• The United States has invested “nearly nothing” in semiconductor manufacturing, while China has invested $150 billion to build its domestic capacity, Raimondo said.”
• Included in the legislation are provisions that would prohibit companies from building most types of new semiconductor manufacturing facilities in China “or any other foreign country of concern” for a decade after receiving federal funding.”  (1)
• “From the private sector, a host of companies descended on Washington…to push the bill over the finish line. Gary Cohn, the former Director of the National Economic Council and a current vice-chairman of IBM said his company alone [brought] over 60 executives to meet with lawmakers.
• A key provision in the bill is the $50 billion for chipmakers.
• Of those funds, $39 billion are earmarked to “build, expand, or modernize domestic facilities” for chip-making.
• The remainder — $11 billion — is set aside for research and development. This money appears designed to alleviate a rift that had been developing between semiconductor companies like Advanced Micro Devices (AMD), Qualcomm (QCOM) and Nvidia (NVDA), which had focused on designing — but not manufacturing — these crucial chips and were worried about being left out.
• Intel (INTC) will be a key recipient of the funds. The company recently postponed the groundbreaking on an Ohio factory because of delays with the bill but promised to move ahead if it becomes law.  Other companies that appear likely to receive funds include Texas Instruments (TXN), Micron Technology (MU), Global Foundries (GFS), and Samsung.
• Another portion [of the bill] is a new “Advanced Manufacturing Investment Credit,” which creates a new 25% tax benefit for semiconductor manufacturing. It’s part of a suite of efforts that, advocates say, will allow the U.S. to catch up in the global semiconductor manufacturing race.
• $4.2 billion will help fund other areas of the industry like workforce training, defense initiatives, future innovation, and for the U.S. mobile broadband market. The money for broadband focuses on “leap-ahead technologies,” including an effort to promote non-Chinese 5G equipment manufacturing.” (2)

What Next?

• The U.S. House of Representatives passed the sweeping legislation today, sending the bill to the White House for President Joe Biden to sign into law. (3)
• “The cost of the bill is still being tabulated. A preliminary analysis from the Congressional Budget Office assesses the bill will incur roughly $79 billion in new spending over the coming decade. The bill will also redirect existing government money to the effort; a fuller accounting is expected to be released soon.” (2)
• In a backlash to the ‘stealth mode’ approach taken by Senator Schumer and Senator Manchin to a Climate, Tax and Healthcare Deal which they are pushing through the reconciliation process,  Senate Republicans are threatening to reverse their support of the CHIPS Plus section of the Chips and Science Act.  In so doing, Senate Republicans run the risk of the political perception that they do not the national security, economic, and innovation incentives the bill represents. This scenario did not play out in the end and the bill has passed.

OODA Loop will continue to provide research and analysis of the granular details of the final $280 bill – including the final version that passes through the House (which is the working assumption right now, unless Congress manages to politically convolute and delay the entire process).

In the meantime, if this legislation holds great promise for your organization’s core competency in your industry sector – or opportunities for new market creation and value proposition design – the details of the Senate version of the bill are linked below for further review. Review it with an eye towards opportunities for advantage.

H. R. 4346 The CHIPS and Science Act of 2022