08 July 2020

Bipartisan Senate Bill Would Fund US Semiconductor Industry

A bipartisan group of senators has introduced another bill to aid the US semiconductor industry. The move signals continuing support across party lines for this important part of the US high technology sector.

The “American Foundries Act” is backed by members not usually found in the same political zip code—including Tom Cotton (R-Ark) and Chuck Schumer (D-NY), as well as Kirsten Gillebrand (D-NY) and Marco Rubio (R-Fla). The legislation would provide $15 billion in incentives for new domestic semiconductor manufacturing, and another $5 billion for public-private partnerships to update US foundries. The “Creating Helpful Incentives to Produce Semiconductors for America Act” introduced by Senators Mark Warner (D-VA) and John Cornyn (R-TX) earlier this month would also provide about $20 billion in funding. 

This bipartisan effort is welcome in the US, but China’s spending has for years outstripped the funding levels in the proposed legislation. The second national semiconductor fund in the PRC was capitalized with almost $30 billion, and is only one part of Beijing’s national business plan to establish a competitive semiconductor industry. The Obama Administration noted the significance of China’s drive to modernize its semiconductor industry in a 2017 report, but the US still lags in putting its money behind its policy.

As we pointed out in an earlier post, CFIUS has blocked a number of Chinese investments in the US semiconductor industry, although some deals are still getting through. Meanwhile, US semiconductor companies are increasingly turning to joint ventures and expansion in China itself, because regardless of the political cross-currents, China remains the world’s largest market for semiconductors.

Whether current trade tensions would continue under a different administration remains a subject of intense speculation in both countries. Some analysts believe Joe Biden’s historical preference for multilateralism indicates he might be less likely to support aggressive use of tariffs, sanctions and export controls in dealing with China. Regardless, however, bilateral competition is likely to remain a bipartisan concern for the foreseeable future.

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