U.S. Lawmakers Propose $25 Billion to Help Chip Industry

(Bloomberg) -- U.S. lawmakers proposed an estimated $25 billion in funding and tax credits to strengthen domestic semiconductor production and counter rising technological competition from China.

The effort would support companies building plants in the U.S. and buying chipmaking equipment, while sponsoring research and development into “cutting edge semiconductor” production, according to information provided by the office of Representative Michael McCaul, a Texas Republican.

Versions of bills to be introduced in the House and Senate are sponsored by members of both parties, including Senator John Cornyn of Texas, a top Senate Republican. The $25 billion is an estimate of funds from state and federal sources over a five-year period, according to a congressional aide.

The proposal is aimed at maintaining U.S. leadership in a $400 billion industry that’s become central to President Donald Trump’s trade war against China. U.S. companies such as Intel Corp. have complained for years that overseas rivals benefit unfairly from government support.

The bills call for the State and Commerce departments to create a federal program that would match state incentives offered to companies that build foundries -- facilities that make chips for other businesses. That could provide as much as $10 billion in direct funds, according to the congressional aide, who asked not to be identified because the amounts are still being negotiated. The Department of Defense will contribute by prioritizing research, development and testing of chip technology, according to the proposals.

A semiconductor manufacturing plant costs an estimated $15 billion to construct.

”This is pretty urgent. We’ve seen how vulnerable we are,” Cornyn said. “And obviously you have to take the first step. This is going to be a multiyear project.”

Direct government support for the chip business would represent a rare foray into industrial policy by the U.S., especially for Republican politicians. Concerns that Chinese companies such as Huawei Technologies Co. represent a threat to U.S. national security have spurred moves by the Trump administration to curb the Asian country’s access to American technology. China is the biggest market for chips.

“Ensuring our leadership in the future design, manufacturing, and assembly of cutting edge semiconductors will be vital to United States national security and economic competitiveness,” McCaul said in a statement. “As the Chinese Communist Party aims to dominate the entire semiconductor supply chain, it is critical that we supercharge our industry here at home.”

The chip industry is the U.S.’s fifth-largest exporter, according to the Semiconductor Industry Association. The sector spent almost $40 billion on research and development last year, about a fifth of its revenue. However, federal funding for semiconductor research has been flat as a percentage of gross domestic product for many years, while China and other countries have increased their spending in this field, the SIA said.

“Semiconductors were invented in America and U.S. companies still lead the world in chip technology today, but as a result of substantial government investments from global competitors, the U.S. today accounts for only 12% of global semiconductor manufacturing capacity,” SIA Chairman Keith Jackson said in a statement.

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