Chips bill advances in Senate Here’s what’s in the $79B legislation – Yahoo Finance

After more than a year of negotiations, Congress is on the cusp of passing a bill to alleviate the chip shortage and shore up U.S. competitiveness with China in part by giving $50 billion to the semiconductor industry.

The Senate voted 64-32 on Tuesday to end debate on the so-called CHIPS+ bill. This key step, which required 60 votes, now sets the stage for final passage in the coming days.

As the key procedural step got underway, Senate Majority Leader Chuck Schumer (D-NY) said the effort will help "one of the most important struggles of this century."

"The 21st century will be won or lost on the battleground of technological innovation," he added.

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.

Lawmakers had previously passed a more ambitious version of the bill, and for a time legislators discussed a slimmed down version that would only include the direct inducements to the semiconductor industry. But in the end, lawmakers added a host of provisions back into the bill, ballooning the cost.

Here are the highlights from in the bill, which Senator Mark Kelly (D-AZ) recently told Yahoo Finance affects the costs for so many things for Americans from your cellphone, to your vacuum cleaner, to the government weapons systems.

President Joe Biden spoke with CEOs, labor leaders, and members of his economic team on Monday during a virtual meeting on semiconductors. (Anna Moneymaker/Getty Images)

Tuesday's vote came after a full court press from the Biden administration to restart the effort after months of fruitless negotiations.

"America invented the semiconductor its time we bring it home, President Joe Biden said at a virtual White House event on Monday.

Meanwhile, Commerce Secretary Gina Raimondo addressed criticism of the bill by stressing that it doesn't aim to make businesses more profitable but instead seeks to invest in the U.S. economy.

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From the private sector, a host of companies descended on Washington this week 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 (IBM), said his company alone was bringing over 60 executives to meet with lawmakers.

The 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.

In any case, 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.

Elsewhere in the bill, another $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.

Another portion is a new Advanced Manufacturing Investment Credit, which creates a new 25% tax benefit for semiconductor manufacturing. Its part of a suite of efforts that, advocates say, will allow the U.S. to catch up in the global semiconductor manufacturing race.

The U.S. role in semiconductor manufacturing has fallen from nearly 40% in 1990 to 12% today, according to a recent report from the Semiconductor Industry Association. The situation is even worse with the worlds most advanced logic semiconductors, 100% of which were manufactured overseas in 2019. The group has applauded progress on the bill.

President Joe Biden holds a semiconductor chip during a 2021 event at the White House. (REUTERS/Jonathan Ernst)

Daniel Clifton, head of Washington research at Strategas, told Yahoo Finance recently that many view semiconductors as "the new oil." If a nation can control oil and chips, you start to control the production of just about anything that's going to happen in the economy and we could see that that's where the long-term trend is, he said.

The bill is also set to restrict semiconductor companies' activities, banning new work in specific countries that present a national security threat to the United States. The language is clearly aimed at China, which has been moving to bolster its semiconductor industry, as well.

The provision is designed to ensure that China doesnt receive any benefits from the new U.S. government funds. We're not going to have to worry so much about the actions of an adversary, meaning China, when it comes to our supply of semiconductor chips, Sen. Kelly said.

On Monday, Biden also noted that the guardrails mean were not going to allow these companies to use these funds to buy back stock or issue dividends.

The bill also includes billions to beef up science training efforts to help the U.S. compete against China. In total, the National Science Foundation, the Department of Commerce, and the National Institute of Standards and Technology will divvy up $52 billion in funding increases over the coming years for initiatives aimed at shoring up U.S. competitiveness in areas like building a STEM workforce

The bipartisan effort has engendered opposition from a swath of Republicans but also one of Biden's own allies. Sen Bernie Sanders (I-VT) called the bill a blank check "at a time when semiconductor companies are making tens of billions of dollars in profits and paying their executives exorbitant compensation packages."

He also savaged the "guardrails" in the package, noting that companies would still be able to outsource some jobs abroad and also use their profits to make stock buybacks if they want.

Despite opposition from Sanders and Republicans on Tuesday, lawmakers were able to nonetheless move to end debate, setting up a vote for likely final passage later this week.

The House of Representatives will then likely consider the bill before they adjourn Friday for their summer recess. Some conservative House Republicans are trying to stop it and have taken to calling it a fake China bill. However, House Minority Whip Rep. Steve Scalise who is charged with counting the votes seemed resigned that it could be headed to Biden's desk by the end of the week.

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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Chips bill advances in Senate Here's what's in the $79B legislation - Yahoo Finance