Sen. Kelly on CHIPS+ Act: 'We'll get it to the president'

The Senate cleared a key hurdle Tuesday on legislation that provides billions of dollars in subsidies for chip production in the U.S., paving the way for passage of a measure nearly a year after lawmakers began debating it.

Senators voted 64-32 to end debate on the so-called "Chips+" bill, advancing it for a final Senate vote in the coming days. If passed, the House would follow as soon as later this week.

In an interview with Yahoo Finance (video above), Arizona Senator Mark Kelly, a lead negotiator on domestic semiconductor legislation, expressed optimism that President Biden will sign the measure into law before the August recess.

“We'll get it to the president," he said, "we'll get it signed into law.”

The trimmed down bill sets aside roughly $52 billion in subsidies to encourage semiconductor companies to increase manufacturing in the U.S., something bipartisan lawmakers have argued is critical to ensuring national security. The measure also includes a new four-year 25 percent tax credit, estimated to be worth roughly $24 billion, along with an additional $11 billion to go towards advanced research and development programs under the Commerce Department. An additional $2 billion will go towards funding other areas of the semiconductor industry including workforce training.

“This is going to bring down costs and secure national security," Kelly said. "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."

Addressing National Security

Bipartisan support to bring semiconductor production back to the U.S. has grown amid growing concerns about the country’s diminishing role in manufacturing.

U.S. share of global manufacturing has fallen from roughly 40 percent in 1990 to 12 percent today, according to a report from the Semiconductor Industry Association. That decline has coincided with fears about China’s growing grip on emerging technology.

The new measure includes guardrails that specifically ban chipmakers who receive U.S. subsidies from building factories in China or “any other foreign country of concern.”

“If we want to support our national security, we can't have the best semiconductor chips that are required for our satellite systems and our advanced fighter jets and chips and other weapons systems made in another country, or by the way tested in another country,” Kelly said. “That doesn't make any sense.”

Senator Bernie Sanders and some Republican lawmakers have pushed back, saying the billions of dollars in subsidies amount to nothing more than corporate handouts, with a select group of companies benefiting from the measure.

‘Sounds like extortion’

On the Senate floor last week, Sanders singled out Intel (INTC), after CEO Pat Gelsinger threatened to move a planned chip manufacturing facility in Ohio outside of the U.S., if Congress failed to act.

Just five companies including Micron Technology (MU) and Texas Instruments (TXN) are expected to receive the lion’s share of “the handouts,” Sanders said, with Intel being the biggest beneficiary.

“In other words, the CEO of a major corporation that made nearly $20 billion in profits last year and a CEO who received a $179 million compensationpackage — is saying to Congress that if you don’t give the microchip industry $76 billion…in order to make more profits, they’re prepared to go to Asia or Europe,” Sanders said. “That sure sounds like extortion to me.”

It ‘comes down to economics’

Supporters of the CHIPS+ measure say the lucrative subsidies and tax credits are critical to competing in a global market.

The European Union has announced ambitious plans to increase its market share of chip manufacturing to 20 percent by 2030. To reach that goal, the European Commision has unveiled a 45-billion euro Chips act, freeing up taxpayer money for semiconductor production. Intel is expected to receive $7.3 billion in subsidies, to build two fabrication plants in Germany.

Kelly said the decision “comes down to economics” for companies, regardless of how lucrative their business is. His home state of Arizona has moved aggressively to secure commitments from chipmakers, with Intel already breaking ground on two new factories worth $20 billion in Chandler, Arizona last fall. Taiwan Semiconductor Manufacturing Corporation (TSM) the world’s largest chipmaker has invested $12 billion in a Phoenix facility.

“Other companies will make decisions, based on the economics and when the EU, France, Germany, Italy is offering them a better deal. They're likely to go there. They’ve made it very clear,” Kelly said. “They want to be here. We've got to be competitive. And this legislation makes us competitive with the rest of the world.”

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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