American Foundries Act calls for $25 billion in semiconductor industry support

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On Thursday, a bipartisan group of U.S. Senators introduced a bill that would provide $25 billion in financial support to the domestic semiconductor industry. The American Foundries Act of 2020 calls for $15 billion to incentivize the modernization of local microelectronics research and production.

The introduction of the Foundries Act follows on the heels of another $22.8 billion bill designed to aid the U.S. chip sector.

American Foundries Act Details

Senators Susan Collins (R-ME),  Kirsten Gillibrand (D-NY), Angus King (I-ME), Jack Reed (D-RI), Marco Rubio (R-FL), and Chuck Schumer (D-NY) co-sponsored the American Foundries bill as an amendment to the National Defense Authorization Act.

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Under its provisions, the proposed legislation would optimize U.S. semiconductor research, development, and production. The Commerce Department would also issue grants to update and expand existing fabrication facilities and build new plants. These new plants would increase U.S. chip assembly, testing, and packaging; tasks typically offshored to Asia for financial reasons.

In addition, the bipartisan bill asks for $5 billion to support American technological leadership in the semiconductor space. It would realize that goal by supplying the National Science Foundation and the Departments of Commerce, Defense, and Energy with new research subsidies.

The legislation would also establish a White House subcommittee to compile an annual report regarding local chip sector development.

Will the American Foundries Bill Become Law?

In early May, Trump administration officials met with microelectronics sector leaders to find ways to bolster the U.S. component industry. Since then, Senators John Cronyn (R-TX) and Mark Warner (D-VA) introduced the $22.8 billion CHIPS for America Act in support of the initiative. Moreover, the Semiconductor Industry Association outlined a proposal calling for $37 billion in domestic chip sector aid.

Despite robust bipartisan support for a U.S. microelectronics industry revival, it is hard to say if Congress will authorize $84.8 billion in semiconductor financial support this year. Directing 11 percent of the $715.9 billion the government spent on national defense in 2019 to one industry would be a significant shift. The systemic nature of the recent round of pro-component sector legislation may see its enactment delayed.

On the other hand, India, China, and Taiwan recently unveiled new multibillion-dollar incentive programs to foster local semiconductor sector growth. If the U.S. does not follow suit, the country risks losing technological preeminence as chipmakers pursue new financing. The possibility of falling behind in such a crucial global industry may prompt faster than regular legislative action.

Ultimately, the recent worldwide push to boost local microelectronics research and production will probably result in more funding for the U.S. component sector. But questions about the amount of financial support and dispersal timelines might delay the process.

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