After years of hand-wringing over the rise of Chinese technology, Capitol Hill is finally ready to put its money where its mouth is.
Senate Majority Leader Chuck Schumer’s plan to pass tens of billions of dollars in emergency funding “this spring” to promote American-made computer chips is already a significant shift in U.S. industrial policy, and the clearest sign yet that Congress is putting real money down to counter Beijing’s lavish subsidies for its own semiconductor industry.
But lawmakers and outside researchers say it’s just the start of an expensive multiyear campaign on Capitol Hill to undercut China’s technological prowess. And although the effort is expected to remain bipartisan, some are already warning of tension between Washington’s plan to boost U.S. competitiveness and the need to bring Europe and other partners into an international alliance on advanced technology.
“I’m hoping the Biden administration, as federal agencies conduct their reviews pursuant to their supply-chain executive order, that they’ll focus less just on ‘buy American’ and more on this idea of ‘buy allied,’” Rep. Mike Gallagher, cochair of the House Armed Services Committee’s new Defense Critical Supply Chain Task Force, told reporters Wednesday.
“As we seek to shore up supply-chain vulnerabilities, we cannot and must not pursue autarky,” Gallagher said.
A global shortage of semiconductors—the cutting-edge computer chips found in everything from smartphones to supersonic missiles—has combined with Beijing’s dramatic investments in domestic chip production to light a fire under Capitol Hill.
Although U.S. companies remain the dominant global producers of semiconductors, they’ve increasingly outsourced their manufacture to facilities overseas. As the challenge from China grows, Congress’s first course of action will be to fund a plan to bring chip-manufacturing plants back to American shores.
In recent weeks, Schumer and other Democratic lawmakers have said they’ll introduce a bill by April providing tens of billions of dollars for the CHIPS for America Act, legislation passed by Congress last year but still awaiting funding. Estimates range between $30 billion and $37 billion, including large grants for the construction of U.S.-based chip factories and money for the underlying infrastructure and research required to boost semiconductor manufacturing capabilities here at home.
“Congress understands that China has spent tens of billions of dollars on building up its domestic capacity,” said Will Hunt, a researcher on semiconductor policy at Georgetown University’s Center for Security and Emerging Technology. “And I think Congress increasingly understands that U.S. domestic wafer capacity, which is a way of measuring how many chips we can manufacture, has gone down quite dramatically over the last 30 years.”
Schumer’s plan, which could come as part of a broader package of bills on China, is likely to garner broad bipartisan support in both chambers. Sen. Tom Cotton, an especially hawkish Republican rumored to harbor presidential ambitions, cosponsored the Senate version of the CHIPS Act when Schumer introduced it last year.
“When’s the last time you saw Schumer and Cotton on the same page for anything?” said Jim Lewis, senior vice president and director of the strategic-technologies program at the Center for Strategic and International Studies.
The majority leader is also expected to soon push for passage of the Endless Frontier Act, which he introduced last year along with Republican Sen. Todd Young. The bill’s previous iteration, which also had bipartisan backing in the House, would’ve allocated a whopping $100 billion to the National Science Foundation, renaming it the National Science and Technology Foundation and focusing the organization’s research on technologies now being pursued by China, including semiconductors.
“Those are the numbers we’re talking about if you want to compete with China,” said Lewis. “People are starting to wake up to that. We’re not going to be able to nickel-and-dime this.”
Additional legislative efforts related to America’s semiconductor supply chain are waiting in the wings. Gallagher said he’s interested in an examination into the vulnerability of Taiwan, which houses some of the most advanced chip-manufacturing plants in the world but sits just offshore of a powerful U.S. adversary. Both he and Rep. Elissa Slotkin said they plan to conclude their supply-chain task force by introducing legislation in time to include it in this year’s National Defense Authorization Act.
Gallagher said they’ll likely “steal” any new semiconductor legislation from the National Security Commission on Artificial Intelligence, which this month released a report on vulnerabilities in the technology supply chain. Kevin McGinnis, a director for research and analysis at the NSCAI, said lawmakers should go beyond grants and institute refundable tax credits for businesses looking to create chip-building plants in America.
“The U.S. government offers approximately half the level of incentives that you might find in South Korea or Taiwan to incentivize semiconductor-fabrication facilities in the United States,” McGinnis told National Journal.
Tax credits have another advantage over grants—they can also be applied to foreign firms. Sweetening the deal for advanced chip manufacturers in Europe and other allied regions to do business in the U.S. may be crucial if the Biden administration hopes to create a transatlantic alliance focused on countering Chinese technologies. On Tuesday, the European Union announced an effort to boost its own domestic production of semiconductors, raising the specter of a transatlantic arms race over computer chips.
“We have to tone down the ‘Buy American’ rhetoric, or at least explain it to the Europeans,” Lewis said. He pointed to the Democracy Technology Partnership Act, legislation introduced last week by a bipartisan group of senators and designed to coordinate research and spending between the U.S. and Europe on advanced technologies, as one way to prevent transatlantic tensions over semiconductors.
“I think that’s the next frontier for these tech bills—how do we develop a partnership with key countries to maintain technological leadership,” said Lewis.
The flood of legislative proposals around semiconductors is a major shift in U.S. industrial policy, which was traditionally characterized by a more hands-off approach. It’s not yet clear whether Congress can scrape together enough funding to compete with Beijing’s massive subsidies for its own chip industry. But Chris McGuire, another director for research and analysis at the NSCAI, said Washington may not need to match China.
“The advantage that we have is our private-sector ecosystem is so robust, that with the government filling the cracks in in those key areas, it has the potential to kind of take off on its own,” said McGuire. “That’s something the Chinese don’t have—they’re going to have to keep dumping money into their system until they either win or they lose.”
“We just have to make sure our system doesn’t have giant cracks in it that causes it to fall apart, and that the Chinese can exploit,” McGuire said.
Read the original article at National Journal.