The US Senate passed the ‘Chips and Science’ bill on July 27, which despite delays has signalled strong bipartisan support to drive domestic semiconductor manufacturing and innovation in other sectors, in a bid to hamper Chinese chip expansion.

The legislation includes the much anticipated, $52.7bn Creating Helpful Incentives to Produce Semiconductors (Chips) bill, and several other funds authorised to develop research and development (R&D) in sectors ranging from energy and aeronautics to bio sciences and cybersecurity.


The Chips bill is specifically aimed at making the US more resilient to future supply chain shocks and bolstering security over critical technologies. Over the course of five years, it will offer incentives, grants and tax credits to develop domestic manufacturing capability, R&D and workforce development. Some $2bn will also be allocated to legacy chip production. 

US vs China chips

During a roundtable discussion with US president Joe Biden about the Chips bill on July 26, US secretary of commerce Gina Raimondo spoke of the need for the country to reclaim its place as a chip manufacturing centre. 

“​​We used to make 40% of the world’s chips; we make about 12% now,” she said. “While we have invested nothing to spur domestic chip manufacturing, China has invested more than $150bn to build their own domestic capacity. So, we’re very much behind.”

There is one clause in the bill that states that any company in receipt of the incentives offered by the US government cannot engage in “the material expansion of semiconductor manufacturing capacity in the People’s Republic of China or any other foreign country of concern”. Other such countries include North Korea, Iran and Russia.

However, this clause notably excludes “the expansion of manufacturing capacity for legacy semiconductors”, meaning that the anti-China block does not apply to the further development of existing facilities. 


Record FDI into chips in the US

The Senate’s decision, which passed with 64 votes to 33, comes in the wake of delays that forced several companies to postpone their plans. One such example was US chip giant Intel, which pushed back the ground-breaking ceremony of its Ohio plant. 

Elsewhere, Taiwan-based semiconductor company GlobalWafers announced in June a $1bn plan to build a facility in Sherman, Texas, which has provided the US with a significant future buffer against supply chain disruptions.

Arun Venkataraman, assistant secretary of commerce for global markets at the US department of commerce, told fDi at the 2022 SelectUSA Investment Summit in June that GlobalWafers has “[plugged] the most significant hole in our domestic supply chain when it comes to semiconductors”. 

Mr Venkataraman added that “GlobalWafers and other companies have been clear that the significant announcements they’ve made really [were] contingent on the ability to get [the Chips] bill passed, and get that funding out the door”.

It has been a record year for foreign chip companies flocking to the US, with 15 greenfield FDI projects tracked in the US semiconductor sector over the first six months of 2022, according to investment monitor fDi Markets. With US interstate projects included, that figure rises to 18 — the second-highest number on record after the 20 tracked in 2011. 

By contrast, fDi has only tracked three semiconductor projects into China over the first half of this year — a record low not seen since 2017.

Now, with the bill passed, Mr Biden is keen to stress the importance of building out a domestic chip industry so as to abate the economic headwinds many Americans are currently facing. 

“It will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers,” Mr Biden said. “It also will create jobs … [and] will mean more resilient American supply chains, so we are never so reliant on foreign countries for the critical technologies that we need for American consumers and national security.”