Vote looms on bill that has high stakes for Texas’ technology sector
Advocates and politicians say the window is closing to pass legislation designed to increase semiconductor production in key hubs including Texas, as the U.S. Senate prepares to vote on a bill that industry advocates, companies and politicians have been working on for over a year.
In a Monday call with reporters from Texas and Idaho, U.S. Secretary of Commerce Gina Raimondo called on Congress to pass a bill designed to encourage companies to expand and build semiconductors manufacturing facilities in the United States.
The push from the White House comes amid a global shortage of semiconductors, the computer chips that operate everything from your laptop to your car,
Raimondo said Texas and Idaho are well-positioned to see expansions and new facilities from semiconductor companies, but said the bill could make or break Texas' ability to continue expanding its semiconductor industry.
"If Congress passes the Chips Act, Idaho and Texas are states that have a lot to gain, but also the most to lose. We know that these companies that are in your states have offers right now from other countries to expand there. And we know that they'll take those offers if Congress doesn't pass this," Raimondo said, and emphasized increased semiconductor manufacturing in the United States is crucial for economic security, job creation, and national security.
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Senate Majority Leader Chuck Schumer said a vote will be held before the U.S. Senate on Tuesday. The Senate is expected to vote on a slimmed-down set of bills to help bolster the U.S. computer chip industry. The House also would have to pass the bill before it could go to the president's desk. If passed, the legislation could authorize grants, tax credits and other financial incentives for semiconductor manufacturers that build plants in the United States, including in Texas.
The new bill is a reduced version of a bill that the Senate passed in June 2021 but never became law, which included $52 billion for chip subsidies and an additional $200 billion to boost U.S. scientific and technological innovation. The House never took up last year's bill, and instead passed a similar but different version in February, which also included trade proposals.
The original Senate bill, theCreating Helpful Incentives to Produce Semiconductors (CHIPS) Act, was authored by Sen. John Cornyn, R-Texas, along with Democrat Senators Mark Kelly and Mark Warner and Republican Tom Cotton. Last year, representatives from tech giants Samsung, Dell Technologies, Infineon, NXP Semiconductors, BAE Systems and AMD met with Cornyn at Samsung's Austin facility to discuss the need for solutions to the supply chain problems and to push for the bill's passage.
Monday afternoon, Cornyn said he is "cautiously optimistic" a bill will pass that includes funding and tax incentives for chip manufacturers. Cornyn said the legislation he hopes to vote on would close the cost gap between manufacturing in the in the United States and other countries.
"If we don't make a decision soon, and I'm talking about in the next couple of weeks, then we can kiss those manufacturing facilities goodbye in places like Texas and Ohio, Arizona and other states around the country that might benefit from that construction, and the high paying jobs that go along with them," Cornyn said.
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Raimondo said the U.S. is overly dependent on foreign countries for chips, and that South Korea, Japan, Germany, France and other nations are aggressively offering incentives to chipmakers to land their facilities.
"We're behind. We buy almost all of our sophisticated chips from Taiwan, and that's a scary place to be," Raimondo said. "Other countries have recently passed their own version of the Chips Act and they are right now every day talking to American semiconductor companies and offering them incentives to expand in those countries... There's a window closing and we're going to lose out to other countries if we don't move now."
Cornyn said the coronavirus pandemic exposed supply chain vulnerabilities in semiconductor manufacturing. Currently, most semiconductors are manufactured overseas, primarily in Asia, a trend that has increased in recent years. Last year, the Semiconductor Industry Association, an advocacy group, estimated the $52 billion federal incentive program would build up the domestic semiconductor industrial infrastructure and could help create 10 new fabs in the United States and add 42,000 semiconductor-related jobs
"If we're going to get some of that manufacturing capacity back to the United States to protect us against potential blockades — whether it comes from a military conflict or a pandemic or a natural disaster — we're going to have to find a way to provide incentives for those manufacturing fabrication facilities to be located here in the United States," Cornyn said.
Both the House and Senate bills have included trade provisions, funding for research and calls for regional technology hub development, but lawmakers have yet to reach a compromise bill able to pass with 60 votes in the Senate. A new bill is expected to include $52 billion in financial incentives and research and a semiconductor investment tax credit. The new bill is not likely to be as helpful for semiconductor industry companies that do not produce their own chips, such as AMD or Silicon Labs.
Within the United States, Texas is one of the biggest producers of semiconductors, exporting billions of dollars worth of chips each year. In Central Texas, semiconductor companies make up about a quarter of all manufacturing output in the region, according to the Austin Regional Manufacturers Association.
Semiconductors are already a pillar of the Central Texas economy, but the region is poised to see big expansions to its manufacturing capacity. Samsung announced last year that it plans to build a $17 billion chip factory in Taylor. NXP Semiconductors is considering a $2.6 billion expansion in Austin that would create up to 800 jobs, tech firm Applied Materials has said that it's considering Hutto for a $2.4 billion research and development center, and chipmaker Infineon Technologies said that it's considering Austin for a $700 million expansion.
Ed Latson, executive director of the Austin Regional Manufacturers Association, predicted more announcements could come following passage of the bill from companies waiting to see the results.
"This is an incredibly important piece of legislation for Central Texas. It's going to inject billions of dollars into our local economy," Latson said. "It's going to mean jobs for small and medium-sized businesses as well as large presences, and it's going to drive the competitiveness of the United States. So we're very hopeful that it passes."
Laston said the inaction and length of time it has taken for an agreement has led to some concern from companies.
"This is such a slam dunk piece of legislation that it's stunning that hasn't passed yet. There's true bipartisan support. It's recognized that we are deficient in this country and our semiconductor capacity. It addresses key strategic issues. It creates jobs. It's just a win in so many different areas," Latson said.
Matthew Bryson, an analyst with Wedbush Securities, said the bill's passage and funding from the government is important for the industry's biggest companies. He predicted projects could scale back if the bill does not pass.
"If you're going to compete for a Fab build you have to offer significant amounts of money or people are going to go where they get help building fabs," Bryson said. "That's the only way to be competitive."
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