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Why China Has U.S. Congress Focused on Computer Chips


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The desire to spend more than $ 50 billion to strengthen the U.S. semiconductor industry seems like a unique point in Washington’s bipartisan consensus. But legislation to implement that initiative – with the goal of increasing U.S. competition with China – now faces an uncertain fate, embroiled in an even greater struggle between Democrats and Republicans on the side. in spending.

1. What does Congress propose to do?

Similar but not identical bills passed by the House and Senate will provide $ 52 billion in five-year emergency funding for semiconductor research and development, legacy chip making, packaging research and microelectronics development. (Legacy chips are often used in cars, airplanes and various military equipment.) Most of that money, $ 50 billion, will be donated through a new fund administered by the Department of Commerce; another $ 2 billion will be managed by the Department of Defense. What’s more, the House version authorizes $ 45 billion for grants and loans to support the strength of the supply chain and manufacture critical items in the U.S.. The two measures allow billions more for research and development at the National Science Foundation, Energy Department and the National Institute of Standards and Technology.

2. Why is it necessary?

While the U.S. is a leader in chip design, nearly 90% of global chip -making capacity is elsewhere – mainly in Taiwan and South Korea. That puts the U.S. at high risk of supply chain disruptions if there are trade disputes, military conflict or, as seen in the past two years, a pandemic. China’s state-led industry policies, aimed at achieving self-sufficiency at all stages of chip production, also threaten U.S. competition. The Chinese government plans to boost local production using government subsidies and tax preferences.

3. How do House and Senate bills differ?

The House bill will contribute $ 8 billion over two years to the Green Climate Fund, a United Nations-led initiative to help developing countries tackle climate change. Republicans opposed; Texas representative Michael McCaul said the money would go to an innumerable “slush fund.” The two bills also take different approaches to creating a new director for the National Science Foundation, the federal agency that funds basic scientific and engineering research. The Senate version will focus it on technology issues. The House bill will focus it on research and development to address societal issues such as climate change and inequality. Another remaining point is trade-the Senate bill would create a new removal process for tariffs on Chinese imports and reinstate past exceptions that have expired. The House bill is silent on tariffs but will extend a trade assistance program for U.S. workers lost in foreign trade.

4. How are the laws aimed at China?

There isn’t a single law that explicitly says the U.S. is racing China for semiconductor sovereignty, but lawmakers have always described the laws that way. The Senate bill “would allow the United States to compete with countries like China on critical technologies like semiconductors,” Majority Leader Chuck Schumer said in May. Any doubt that China is the real target of the legislation has been put to rest by several provisions unrelated to semiconductors.

5. What are those provisions?

Both fees include funding to create alternatives to Chinese 5G telecommunications equipment, which the U.S. is concerned could be used to commit cyberattacks or espionage. (China denies that.) Both bills would impose sanctions on China for its treatment of predominantly Muslim Uighurs in the far -western region of Xinjiang and raise the rank of U.S. special coordinator for Tibetan issues in State Department. The Senate bill would require U.S. agencies to treat Taiwan’s elected government as “legitimate representative of the Taiwanese people” and stop using China’s chosen term, “Taiwanese authorities.” The Senate will also impose additional penalties on China for cyberattacks and theft of trade secrets. The House bill would allow Hong Kong residents to apply for temporary protected status in the U.S. and extend the ban on the export of certain detention equipment to the Hong Kong police force. After the Senate passed its bill in June, Chinese lawmakers said the legislation “undermines China’s development path and domestic and foreign policies” and “interferes with China’s internal affairs under flag of innovation and competition. “

6. What are the prospects?

Lawmakers have been working to restore both versions of the bill since May, and Democratic leaders want to bring a compromise step to the floor in the August recess. But the bill was hit with a snag when Senate Republican Leader Mitch McConnell in Kentucky announced that he would withdraw his support for the bill if it tied to other domestic Democrat proposals, such as lowering prescription drug prices and tax increases on the rich and corporations. McConnell was supported by other Senate Republicans, including John Cornyn of Texas, a key player in China’s legislation. Other lawmakers, including Cornyn, have pushed for the passage of chips alone or as part of priority legislation such as spending fees or the annual defense allowance. Republicans also forced Speaker Nancy Pelosi to cast a vote on the Senate-passed version of the bill that did not reconcile it with the House version, clearing it for the president’s signature.

More stories like these are available at bloomberg.com



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