Senate Approves Bill Injecting Cash Into Semiconductor Industry

Matt Posky
by Matt Posky

Apologies for all the semiconductor news. But it’s the topic of the day, with the United States Senate recently approving $52 billion in emergency spending to help bolster domestic chip production and another $190 billion for R&D programs.

Passing the vote (68-32) under the premise that boosting localized chip production would help prevent domestic automakers from having to cut corners, the Senate is also suggesting the funding could give the U.S. a competitive advantage against China. The Communist Party of China (CCP) has opposed the U.S. Innovation and Competition Act (formerly the Endless Frontier Act), with statements released from the National People’s Congress (NPC) demanding the legislation be halted immediately.

“[This bill] smears China’s development path and domestic and foreign policies,” read statement reported by the Xinhua News Agency,” [it] interferes in China’s internal affairs under the banner of innovation and competition.”

Other media entities similarly operated under the supervision of the Chinese government have issued similar stories, often framing the United States as an economic aggressor. That is debatable, though supporters of the bill have clearly implied that the bill is partially designed to combat China’s growing industrial dominance and global influence.

From the Global Times:

In a statement, the NPC expressed its strong dissatisfaction and firm opposition to the so-called US Innovation and Competition Act of 2021, which fabricates so-called “China treat” to preserve the US global hegemony and seeks to deprive China of its legitimate development rights through technological and economic “decoupling”.

The harshly worded statement also come as the NPC’s standing committee is also moving ahead with an anti-foreign sanctions draft law this week, which is aiming to counter unilateral and discriminatory sanctions imposed by foreign governments on Chinese entities and individuals.

“At a time when the world enters a period of turbulence and change, the practice of treating China as an ‘imaginary enemy’ at every turn is against the general trend of the world, unpopular and doomed to fail,” reads the statement.

With the CCP repeatedly signaling that its intends on invading Taiwan, there’s a distinct possibility that the region could end up with a stranglehold on the chip industry. Western countries have basically all started to think about how to avoid such a catastrophe, largely ignoring the political fallout accompanying the invasion of a sovereign island nation. The European Union has also launched initiatives to bolster localized chip production this year, which was similarly opposed by China.

While the brunt of the proposed funding would actually go toward supporting research at universities and trade schools, $52 billion is to go directly toward supporting the industry. Bloomberg reported that has gone over incredibly well with those in the chip business.

“Semiconductors form the nerve center of America’s economy, national security, and critical infrastructure,” said John Neuffer, the president and CEO of the Semiconductor Industry Association. “We look forward to working with leaders in the administration and Congress to swiftly enact needed federal investments in chip technology to help ensure more of the chips our country needs are researched, designed and manufactured on U.S. shores.”

The latter aspect of the bill was championed by Republicans (ditto for the China-focused amendments) after they criticized Democrats for wanting to devote the brunt of the funding to educational concerns and being soft on the CCP. Several billion has also been earmarked for defense spending, specifically for any chip related research conducted by DARPA over the next five years. But some on the right conversely believe this is at odds with the free-market approach and hinged on an unsavory collaboration between private corporations and the government.

“Maintaining our technological superiority over China requires punishing bad Chinese behavior and relying on the natural innovative entrepreneurship of America’s market economy, not by imitating Chinese central planning,” Pennsylvania GOP Senator Pat Toomey said in a statement before voting against the bill.

This is a slippery fish because everyone is aware that chip shortages are absolutely crippling our ability to manufacture goods, specifically in respect to automobiles. But not everyone feels comfortable with the solutions being presented.

Currently, the bill enjoys the support of Senate Democrats, the Biden administration, and gaggle of Republicans that appear broadly okay with government spending. But the House Science Committee has some ideas of its own about how to fund R&D programs that would benefit the domestic semiconductor industry. Marrying those to the Senate proposals could delay progress and House Republicans have not been signaling the same enthusiasm in respect to using government money. Though they have indicated a desire to further protect intellectual property relating to Chinese businesses and an understanding that domestic manufacturers are really struggling due to the chip shortage.

We’ll have to see how it goes but were predicting a secondary slew of amendments before anything passes into law.

[Image: Architect of the Capitol]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Schmitt trigger Schmitt trigger on Jun 10, 2021

    I agree with the posters above that Just In Time greatly exacerbated the problem. JIT is like a house of cards: it is sooooo light weight, however the smallest breeze and everything comes tumbling down. Yet most companies, intent on squeezing the last half penny out of a product, embraced it with open arms and open legs.

    • Daniel J Daniel J on Jun 11, 2021

      I've seen both sides of this coin. The other option is for companies to sit on thousands or even 10's of thousands of chips which cost them capital, and then just to turn around and have to dump them as soon as the next latest and greatest thing comes out. Before the market crash back in 07 or 08 our company had about a 30 day lead time on what we were making. We were sitting on millions of dollars of inventory. This was great for the consumer and for us when we had demand, but it really sucked for two reasons. The first was simply that in our particular business, the chips were changing every 6 months, and our customers were demanding the latest and greatest. That meant there were lots of write offs of inventory. It also sucked when demand halved in a year period after the crash. When we went to "JIT", we were able to provide customers better technology without the overhead of millions of dollars in inventory. The only downside was lead time went from 60 days to 90 days because just as we reduced inventory, so did our suppliers.

  • Dukeisduke Dukeisduke on Jun 10, 2021

    Not all semiconductor companies will bite on this, as it's focused on the short term, not the long term.

  • Dave Holzman A design award for the Prius?!!! Yes, the Prius is a great looking car, but the visibility is terrible from what I've read, notably Consumer Reports. Bad visibility is a dangerous, and very annoying design flaw.
  • Wjtinfwb I've owned multiple Mustang's, none perfect, all an absolute riot. My '85 GT with a big Holley 4 barrel and factory tube header manifolds was a screaming deal in its day and loved to rev. I replaced it with an '88 5.0 Convertible and added a Supercharger. Speed for days, handling... present. Brakes, ummm. But I couldn't kill it and it embarrassed a lot of much more expensive machinery. A '13 Boss 302 in Gotta Have It Green was a subtle as a sledgehammer, open up the exhaust cut outs and every day was Days of Thunder. I miss them all. They've gotten too expensive and too plush, I think, wish they'd go back to a LX version, ditch all the digital crap, cloth interior and just the Handling package as an add on. Keep it under 40k and give todays kids an alternative to a Civic or WRX.
  • Jpolicke In a communist dictatorship, there isn't much export activity that the government isn't aware of. That being the case, if the PRC wanted to, they could cut the flow of fentanyl down to a trickle. Since that isn't happening, I therefore assume Xi Jinping doesn't want it cut. China needs to feel the consequences for knowingly poisoning other countries' citizens.
  • El scotto Oh, ye nattering nabobs of negativism! Think of countries like restaurants. Our neighbors to the north and south are almost as good and the service is fantastic. They're awfully close to being as good as the US. Oh the Europeans are interesting and quaint but you really only go there a few times a year. Gents, the US is simply the hottest restaurant in town. Have to stand in line to get in? Of course. Can you hand out bribes to get in quicker? Of course. Suppliers and employees? Only the best on a constant basis.Did I mention there is a dress code? We strictly enforce it. Don't like it? Suck it.
  • 1995 SC At least you can still get one. There isn't much for Ford folks to be happy about nowadays, but the existence of the Mustang and the fact that the lessons from back in the 90s when Ford tried to kill it and replace it with the then flavor of the day seem to have been learned (the only lessons they seem to remember) are a win not only for Ford folks but for car people in general. One day my Super Coupe will pop its headgaskets (I know it will...I read it on the Internet). I hope I will still be physically up to dropping the supercharged Terminator Cobra motor into it. in all seriousness, The Mustang is a.win for car guys.
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