Biden signs bill aimed at boosting U.S. chip production, competitiveness

WASHINGTON—President Biden Aug. 9 signed into law a bill that will provide billions of dollars to boost domestic semiconductor production, including dedicated funding for microchips used by the auto industry.

The bipartisan bill—known as the CHIPS and Science Act, or CHIPS-plus—provides more than $52 billion in government subsidies for U.S. semiconductor research, design and production. Of that funding, $2 billion is designated for the production of mature node, or "legacy chips," used by auto makers and parts suppliers.

It also includes a 25 percent tax credit for investments in semiconductor manufacturing through 2026 and invests billions of dollars in science and technology innovation to strengthen economic growth, job creation and national security.

"America invented the semiconductor ... and this law brings it back home," Biden said in remarks Tuesday from the White House. "It's in our economic interest, and it's in our national security interest, to do so."

The Senate approved the bill July 27, and the House passed it a day later.

The bill is a trimmed-down version of legislation previously passed by the Senate and House to address the global semiconductor shortage and other supply chain disruptions. That legislation also sought to improve U.S. competitiveness with countries such as China, Taiwan and South Korea, as well as the European Union, which are all investing in semiconductor manufacturing.

Funding for the CHIPS—Creating Helpful Incentives to Produce Semiconductors for America — Act was included in the U.S. Innovation and Competition Act that was passed by the Senate in June 2021 and in the House's version that was passed in February.

The legislation signed into law Aug. 9 has been slammed by some critics, including Sen. Bernie Sanders, a Vermont independent, who has called it a "blank check to the microchip industry."

Republican Sen. Pat Toomey of Pennsylvania has referred to the bill as a "corporate welfare handout" to "an extremely sophisticated, profitable industry in the U.S.—semiconductor manufacturing."

Biden, during his remarks, pushed back on the criticism. He also touted recently announced plans by technology giant Intel Corp. and other semiconductor manufacturers to invest billions in chip production in the U.S.

"This law is not handing out blank checks to companies," Biden said. "Today, I'm ordering my administration to be laser-focused on the guardrails that will protect taxpayers' dollars," such as preventing companies from using the funds to buy back stock or issue dividends.

The bill's enactment has been long-awaited by the auto industry, which has repeatedly called for government intervention to address the persistent global semiconductor shortage that began in 2020.

The pandemic-induced supply disruption has forced auto makers to cut vehicle production and eliminate certain vehicle features.

Globally, more than 13 million vehicles have been removed from auto makers' production schedules since the start of 2021 because of the shortage, according to estimates from AutoForecast Solutions.

"Other countries are taking aggressive steps to get ahead of the United States on semiconductor production. By investing in American-made chips today, our country will be in greater control of its own destiny tomorrow—not to mention less reliant on foreign suppliers and governments," John Bozzella, CEO of the Alliance for Automotive Innovation, said in a statement last month after the bill's passage by the Senate and House.

The lack of chips prevented 1.5 million vehicles from being produced in the U.S. last year, according to the alliance, leaving dealerships with lower-than-normal levels of new-vehicle inventory.

Autos Drive America, which represents the U.S. operations of international auto makers such as Toyota and Volkswagen, said the newly signed law will "bolster the U.S. economy against supply chain disruptions."

"We look forward to working with the U.S. Department of Commerce to ensure the legislation is implemented to maximize opportunities for international auto makers to boost production across the country and create even more careers in modern manufacturing," Jennifer Safavian, the group's CEO, said in a statement.

Sens. Gary Peters and Debbie Stabenow, both Michigan Democrats, worked to secure the $2 billion incentive fund dedicated to support legacy chip production for critical manufacturing sectors, including the auto industry.

"This problem only gets bigger as time goes on," Peters told reporters last month.

As the auto industry transitions to electric vehicles and adds more automated features and advanced safety technologies, more chips will be needed, he added.

"The demand for chips is increasing every single year, dramatically," Peters said. "We have to get in front of this problem. ... We have to start building these facilities now."