On July 20, the Senate voted to advance a slimmed-down version of its bill designed to increase semiconductor production in the United States and let the country compete with China in that sector.
Chips Act Vote
According to CNBC, the bill cleared a key procedural hurdle in a 64-34 vote even as lawmakers worked on finishing several sections of the legislation.
The bill will provide around $50 billion in subsidies to bolster computer chip manufacturing in the United States. It is a multifaceted bipartisan effort that combines the interests of a lot of committees, ranging from national security to economics.
US Senate's procedural step forward paves the way for the chamber to hold a vote on final passage early next week.
The bill would then travel to the House for passage before it would head to President Joe Biden's desk for signature and turn it into law, according to The Washington Post.
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The broadest aim of the legislation is to incentivize the chip production within the United States to decrease its dependence on China and Taiwan.
Biden administration officials say that a larger domestic chip industry would help ease the semiconductor chain disruptions that have affected the economic recovery from COVID-19 and insulate the United States from supply routes dominated by China, the country's political rival.
Global Chip Shortage
The global chip shortage since 2020 rippled through several industries, including mobile phones, automakers, and consumer technology companies and defense systems manufacturers.
Sen. John Cornyn, a Republican from Texas and author of the Senate's original text, talked about the economic implications of the legislation in his tweets on July 20.
Sen. Cornyn tweeted that if the US lost access to advanced semiconductors in the first year, GDP could shrink by 3.2% and the country could lose 2.4 million jobs.
The senator added that the GDP loss would be larger, around $718 billion, than the estimated $240 billion of US GDP lost in 2021 because of the ongoing chip shortage.
The centerpiece of the legislation is $52 billion to rebuild domestic chip production and tax breaks to encourage the construction of plans based in the United States, according to VOA News.
Chip stocks rallied on July 20 ahead of the expected vote, with Intel up 3.9%, Nvidia seeing a 5.5% increase and Texas Instruments rising 3.1% all ahead of the broader S&P 500's 2.8% gain.
The procedural step forward comes more than a year after the US Senate in a bipartisan vote first approved a $250 billion bill to reinforce the country's chipmaking and invigorate American research and development.
However, the House never considered the legislation after the US Senate cleared it back in June 2021.
House Democrats wrote their own version of the competition act with a gentler national security tone and a better emphasis on climate change funding. But the House Republicans opposed the bill.
Democrats in both chambers have attempted to reconcile their difference for months. With annual inflation running above 9% and the party set for the upcoming midterm elections, the Biden administration has suggested it would approve a simpler bill that is aimed at just magnifying chip production.
It is still not certain whether Senate Democrats will be able to get 60 votes needed to circumvent a filibuster on final legislation.
Doing so would need support from a lot of Republicans, who have lamented that much of their work to create provisions to compete with China will likely not be passed.
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Written by Sophie Webster
