Joe Biden passed bill to boost Domestic chipset production
Joe Biden passed bill to boost Domestic chipset production

Joe Biden passed bill to boost Domestic chipset production
In midst of a chip shortage, US President Joe Biden signs bills to increase domestic chip production

Joe Biden passed bill to boost Domestic chipset production
Joe Biden passed bill to boost Domestic chipset production

Democrats pushed legislation through the House on Friday that they believe would better prepare the United States to compete with China economically and globally by bolstering the local semiconductor sector and shoring up frayed supply lines.

By a vote of 222-210, the measure was approved. It is a significant step forward for a key Biden administration objective, but the measure will almost certainly be heavily altered as negotiators work to resolve disagreements with what the Senate enacted roughly eight months ago.

President Joe Biden pushed Congress to strike an agreement as soon as possible, adding, “America cannot afford to wait.” The roughly 3,000-page package, which does not include hundreds of changes proposed this week, involves substantial spending aimed at boosting semiconductor production in the United States.

The big-ticket items include $52 billion in grants and subsidies to support the semiconductor sector and $45 billion in distribution chain strengthening for high-tech products.

However, Democrats tucked in additional demands that have alarmed Republicans about the bill’s cost and scope. Rep. Adam Kinzinger of Illinois was the sole Republican to vote in favor of the bill, while Rep. Stephanie Murphy of Florida was the only Democrat to oppose it.

What’s the new bill all about?

The bill includes $8 billion for a fund to assist developing countries in adapting to climate change; $3 billion for facilities to reduce the United States’ reliance on Chinese solar components; $4 billion to assist communities with significantly higher unemployment than the national average; and $10.5 billion for states to stockpile drugs and medical equipment.

Prior to the election, Democrats were in a festive mood after the latest employment report showed companies adding 467,000 jobs in January. They predicted that the measure will result in further positive news on that front. The bill provides Democrats with an opportunity to address voter worries about the economy at a time when scarcity of computer chips has resulted in increased pricing for autos, gadgets, and medical devices.

To demonstrate that his administration is addressing inflation worries, Biden emphasized the vote at a White House event on Friday and reminded Americans of Intel’s announcement two weeks ago that it will establish two computer chip manufacturing operations in Ohio.

Republicans, who have been hammering Democrats on increasing inflation for months, condemned the proposal as “toothless” and falling short of what is required to hold China responsible for a variety of economic and human rights acts. They further claimed that it would squander government money on environmental projects and other ineffective activities.

What else we know so far?

Big chipmakers like Intel and Samsung have recently announced intentions to establish new plants in the United States, but Raimondo points out that they have also stated that they can go “larger and quicker” with federal assistance. Conversely, America’s share of global semiconductor production has consistently declined from 37 percent in 1990 to around 12 percent now.

The Biden administration and Congress are attempting to reverse this trend, which industry executives believe is being pushed by foreign competitors getting substantial government subsidies. The pandemic has put pressure on the chip supply chain.

According to a report released this week by the Commerce Department, the median inventory of some semiconductor items has reduced from 40 days in 2019 to less than five days in 2021.  The research, stakeholders do not expect the problem to go away in the next six months. The findings were used by the administration in its demand for Congress to act.

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