President Joe Biden signed the CHIPS and Science Act on Aug. 9, allocating a $280 billion funding package toward boosting domestic semiconductor manufacturing and various research endeavors.
“The CHIPS and Science Act will boost American semiconductor research, development, and production, ensuring U.S. leadership in the technology that forms the foundation of everything from automobiles to household appliances to defense systems,” said a White House fact sheet on the law.
“The law will also ensure the United States maintains and advances its scientific and technological edge.”
The administration maintains that the mammoth spending package would improve jobs and national security by making the United States less dependent on foreign supply chains and building a more robust workforce.
Semiconductors are used in many technologies, ranging from cars to hypersonic missiles. The funding package was also widely hailed as a means of improving the nation’s competitiveness with an increasingly hostile communist China.
CHIPS and Science Act
“Today represents a more secure economy, jobs, and a stronger future for our nation. America is delivering.”
About $52 billion will be spent on manufacturing and related expenses. Much of the remainder of the funds will go toward tax breaks for major tech corporations, green energy initiatives, and research grants for the administration’s various social equity projects.
Notably, the law will grant billions toward investments in “disadvantaged communities” to ensure that semiconductor manufacturers “support equitable economic growth and development.”
Specifically, the White House said that the law will devote substantial funding to conducting research at historically black colleges and also to combating “gender-based harassment in the sciences.”
Critics from both sides of the aisle have lambasted the law as a corporate handout that will increase inflation and hurt U.S. taxpayers.
“The question that we should be asking is this,” said Sen. Bernie Sanders (I-Vt.) while debating the bill. “Should American taxpayers provide the microchip industry with a blank check of over $76 billion at the same exact time when semiconductor companies are making tens of billions of dollars in profits and paying their CEOs exorbitant compensation packages?”
“I think the answer to that is a resounding no.”
“Bernie Sanders and I almost never agree but he is right about so-called CHIPS bill,” Sen. Chuck Grassley (R-Iowa) wrote on Twitter. “It’s just a huge govt handout to massive [and] already-profitable companies. Why would we spend more taxpayer dollars for unnecessary corporate welfare?”
Congress passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act in January 2021. However, lawmakers subsequently failed to approve a bill to appropriate funding for the measure.
The Senate passed a version of the bill in June 2021, titled the Innovation and Competition Act (USICA). That bill included $39 billion to build semiconductors over five years, $11.2 billion for CHIPS Act research and development activities, and some $200 billion to boost scientific and technological innovation through tax credits for companies that manufacture chips.
Though USICA passed the Senate 68–32, House Democrats balked at the proposed funding of tax credits for chip companies. In February, the House passed its version of the bill, the America COMPETES Act, which included the $52 billion for semiconductor manufacturing but cut the $200 billion toward other programs.
The House bill also included a broader swath of funding for unrelated projects, such as grants for students studying “green” chemistry, which drew ire from Republicans.
The final version of the funding package signed by Biden on Tuesday appeared to have included most of the requests from both Democrats and Republicans.