US Congress passes $280B chip bill to counter China

The House passed a $280 billion package to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the United States and help it better compete with international rivals, namely China.

The “Chips and Science Act” authorises about $52 billion in government subsidies for US semiconductor production and research, and an investment tax credit for chip plants estimated to be worth $24 billion.

The bill was approved by a solid margin of 243-187, sending the measure to President Joe Biden to be signed into law and providing the White House with a major domestic policy victory. Twenty-four Republicans voted for the legislation.

“Today, the House passed a bill that will make cars cheaper, appliances cheaper, and computers cheaper," Biden said. “It will lower the costs of every day goods. And it will create high-paying manufacturing jobs across the country and strengthen US leadership in the industries of the future at the same time."

Republicans argued the government should not spend billions to subsidise the semiconductor industry and GOP leadership in the House recommended a vote against the bill, telling members the plan would provide enormous subsidies and tax credits "to a specific industry that does not need additional government handouts.”

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Increasing deficits

The bill provides more than $52 billion in grants and other incentives for the semiconductor industry as well as a 25 percent tax credit for those companies that invest in chip plants in the US. It calls for increased spending on various research programs that would total about $200 billion over 10 years, according to the Congressional Budget Office.

The CBO also projected that the bill would increase deficits by about $79 billion over the coming decade.

A late development in the Senate — progress announced by Wednesday night by Democrats on a $739 billion health and climate change package — threatened to make it harder for supporters to get the semiconductor bill over the finish line, based on concerns about government spending that GOP lawmakers said would fuel inflation.

Some Republicans criticised the bill as not tough enough on China, and GOP leaders emphasised that point in recommending a “no” vote. Their guidance acknowledged the threat China poses to supply chains in the US, but said the package "will not effectively address that important challenge."

Zhao Lijian, a Chinese Foreign Ministry spokesman, commenting before the House vote, said the US “should not put in place obstacles for normal science, technology and people-to-people exchanges and cooperation” and "still less should it take away or undermine China’s legitimate rights to development.”

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