A bipartisan majority in the U.S. House on Thursday gave final approval to a $280 billion piece of legislation that is intended, in part, to reinvigorate domestic production of semiconductor chips, a shortage of which has crippled Detroit’s automakers in recent years.
The bill, a whittled-down version of earlier legislation that was meant to improve American competitiveness in the face of challenges from China and other Asian rivals, includes some $52.7 billion in grants over five years to help ramp up U.S. production of semiconductors, $2 billion of which is earmarked specifically for the kind of chips used in the auto industry.
The House voted 243-187 in favor of the legislation, with 24 Republicans joining Democrats and rejecting the contention by others in their party that it interfered in the free market and came at a time when Democrats are preparing legislation that would increase taxes on some businesses.
All of Michigan’s seven Democratic members in the U.S. House delegation voted for the bill. Only two of the state’s seven Republican members, U.S. Reps. Peter Meijer of Grand Rapids and Fred Upton of St. Joseph, joined them, with the others voting against it, despite the support from the auto industry.
“The reality is we need to make more chips and we need to make them in America,” U.S. Rep. Debbie Dingell, D-Ann Arbor, said during the debate on the bill, noting that a shortage of chips — the production of which is dominated by Asian manufacturers and are used in electronics, appliances and many more products — led to auto plants being idled and workers being temporarily laid off as cars and trucks sat on lots, waiting for needed chips to be delivered.
General Motors spokesman Matt Ybarra said the bill “represents an important step to ensure that the U.S. is positioned to maintain and enhance its place as the leader in automotive innovation.” Stellantis, which was formerly Chrysler, put out a statement also applauding its passage, saying, “Increased domestic chip-making capacity will provide critical support for our $35 billion investment in electrification and related software.”
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Ford Motor Co.’s chief policy officer, Steven Croley, added that the bill “will empower the United States to lead in the global transition to electric and connected vehicles and alleviate supply constraints caused by the global shortage of legacy semiconductor chips our industry needs.”
Some modern vehicles use thousands of chips, which are tiny circuits that control the flow of electrical current. The legislation now goes to President Joe Biden, who has signaled he will sign it into law — giving him and his party a needed victory at a time of rising inflation and economic slowdown.
Legislation won’t solve current shortfall but could help in future
Even though the legislation won’t solve the current shortage in semiconductors, which has resulted from shutdowns overseas at the height of the COVID-19 pandemic and supplies going elsewhere as automakers and other U.S. manufacturers closed facilities at that time, it is seen as a needed boost to revitalize the domestic industry in the future.
Supporters have noted that the shortage has played a role in forcing up prices of products, including cars and trucks, adding to inflation, and that the U.S. also needs a ready supply of semiconductors to protect its defense capabilities, since the chips are a vital part of weaponry, telecommunications, aircraft and more.
Automakers and suppliers clamored for passage of the funding, which has been bogged down in Congress for more than a year. And it has been a priority of Michigan’s delegation, especially among Democrats — with House Speaker Nancy Pelosi, D-Calif., making two visits to the state, including one just last week, to talk about the importance of passing the bill.
“Congratulations to the U.S. House and Senate for passing this vital Chips-plus measure that will help restore the motor vehicle component semiconductor production and strengthen the U.S. supply chain,” said Bill Long, president and CEO of the Motor & Equipment Manufacturers Association, an organization of auto suppliers. He added specific thanks to U.S. Sens. Debbie Stabenow and Gary Peters, both D-Mich., and the state’s House delegation for securing the funds dedicated to facilities that make chips needed by the auto industry.
U.S. Rep. Dan Kildee, D-Flint Township, said the legislation means American manufacturers may someday not be forced to rely on foreign-made chips. “We can bring chip production back to Michigan and the United States,” he said.
Upton, R-St. Joseph, said, “Bringing that production back onshore will lead to jobs for our workers, lower costs for our manufacturers and help eliminate the monthlong delays Americans are facing for basic goods and services like autos.”
Meijer, who continued to show his independence from the rest of his party, chided Democrats as having “played politics” with the bill for more than a year, initially weighing it down with other proposals. In the end, however, he said the legislation is needed.
“China hates this bill because it will degrade the Chinese Communist Party’s ability to build chips under 28 nanometers and bolster advanced chip production in the United States, which is essential for our future competitiveness,” he said. “I was more than happy to stand against the CCP today.”
Bill also includes research funding, tax credits
Most of the $53.7 billion will go to grants to companies to build, expand or modernize semiconductor manufacturing in the U.S. as well as providing money to spur research and development, improve workforce training and look into further defense capabilities. Other portions of the bill include some $24 billion in tax credits for the industry to improve its capabilities. There is also some $200 billion authorized in other scientific research over 10 years, though that funding will have to go through the annual appropriations process to be doled out.
“The House passed a bill that will make cars cheaper, appliances cheaper and computers cheaper,” Biden said in a statement. “It will lower the costs of everyday goods. And it will create high-paying manufacturing jobs across the country and strengthen U.S. leadership in the industries of the future at the same time.”
Already, the promise of the federal investment has spurred promises of new plants, including Intel’s plans for a $20 billion chip facility in Ohio and Samsung’s proposed $17 billion plant in Texas. But it remains to be seen whether the passage of the bill will dramatically help Biden’s low approval ratings, since those plants won’t be opening any time soon.
The Senate held a bipartisan vote more than a year ago to advance a competitiveness bill that included the funding, only to see it first get bogged down in the House and then have it stall in a conference committee between the two chambers. Republicans in the Senate then soured on it when being faced with Democratic plans to ram through social spending and climate change legislation, though they dropped their opposition when Sen. Joe Manchin, D-W.Va., suggested a few weeks ago he couldn’t back that wider legislation and it couldn’t move forward without his support.
Perhaps coincidentally, Manchin and Senate Majority Leader Chuck Schumer, D-N.Y., announced a new, narrower deal on health care and climate change legislation this week after the Senate passed the semiconductor bill, catching Republicans flat-footed. That deal also includes provisions to extend tax credits for the purchase of new and used electric vehicles, a priority of the auto industry.
Staff writers Eric D. Lawrence, Jamie L. Lareau and Phoebe Wall Howard contributed to this report..