US Senate Democrats Propose $52 Billion For US Chip Production

The United States continues to explore ways to bolster semiconductor production in America, to combat the crippling chip shortage impacting multiple industries.

Reuters has reported that US Senate Democratic Leader Chuck Schumer has unveiled revised bipartisan legislation late Tuesday to approve $52 billion, in order to significantly boost American semiconductor chip production and research over five years.

The emergency funding proposal has been included in a revised China Bill that the US Senate is examining this week. It proposes to spend a total of $120 billion on basic US and advanced technology research to better compete with China.

US manufacturing

Last week Michael Dell, founder and CEO of the world’s third largest PC maker, painted a bleak picture about the ongoing silicon shortage.

He warned that the chip shortage is not going away soon, and may take a number of years to resolve, because even if chip factories are built all over the world, it takes time to get them operational (typically at least two to three years).

And this warning came after analyst house Forrester last month warned the global shortage of semiconductors is not going to end any time soon due to fabless chip manufacturing trends and supply hoarding.

So in order to address this, US political figures are seeking emergency funding to build chip manufacturing in the US (most chip manufacturing takes place in Asia).

Indeed, a lot of chip manufacturing takes place in Taiwan, which is combating a severe drought which is not helping production.

Emergency funding

“American manufacturing has suffered rather dramatically from a chip shortage,” Schumer was quoted by Reuters as saying. “We simply cannot rely on foreign processors for chips. This amendment will make sure that we don’t have to.”

According to Reuters, the proposal includes $49.5 billion in emergency supplemental appropriations to fund the chip provisions that were included in this year’s National Defense Authorization Act, but which require a separate process to garner funding.

President Joe Biden has also called for $50 billion to boost semiconductor production and research.

“There is an urgent need for our economic and national security to provide funding to swiftly implement these critical programs. The Chinese Communist Party is aggressively investing over $150 billion in semiconductor manufacturing so they can control this key technology,” a bill summary released Tuesday said.

The measure would “support the rapid implementation of the semiconductor provisions” in the defense bill.

Why is it happening?

The US Commerce Department earlier this month asked Taiwanese chipmakers to prioritise the needs of American car makers suffering from the ongoing silicon shortage.

The chip shortage is the result of a perfect storm of events, namely increased demand for electronic devices due to people being housebound during the Coronavirus pandemic, as well as US sanctions against Chinese tech firms.

The car industry itself has been hit hard as it tends to not carry large amount of stock, and it scaled back chip orders at the start of the global pandemic in early 2020, only to see strong demand for new cars.

And the issue has quickly become a political priority around the world.

The US Senate has called for the creation of a White House “chief manufacturing officer” to help prioritise America’s manufacturing base.

It should be remembered that US President Joe Biden has already signed an executive order back in February to tackle a number of pressing shortages for four critical products.

That included semiconductor chips, electric vehicle batteries and rare earth minerals.