U.S. lawmakers propose $22.8 billion in aid to semiconductor industry

(Reuters) - A bipartisan group of U.S. lawmakers on Wednesday introduced a bill to provide more than $22.8 billion in aid for semiconductor manufacturers, aiming to spur the construction of chip factories in America amid a strategic technology rivalry with China.

Chip factories can cost up to $15 billion to build, with much of the expense in the form of pricey tools. The proposal would create a 40% refundable income tax credit for semiconductor equipment, $10 billion in federal funds to match state incentives to build factories, and $12 billion in research and development funding.

It would authorize the Defense Department to use funding under the Defense Production Act to “establish and enhance a domestic semiconductor production capability.” While a network of “trusted foundries” exists in the United States to help supply chips to the U.S. government, many chips must still be sourced from Asia.

Senators John Cornyn, a Texas Republican, and Mark Warner, a Virginia Democrat, introduced the bill in the Senate. Aides to Representatives Michael McCaul, a Texas Republican, and Doris Matsui, a California Democrat, said the two planned to introduce a version in the U.S. House of Representatives on Thursday.

While some U.S. firms such as Intel Corp and Micron Technology Inc still make chips in the United States, the industry’s center of gravity has shifted to Asia, where Taiwan Semiconductor Manufacturing Co (TSMC) has more than half of the overall market for contract manufacturing chips and an even stronger hold on the most advanced chips.

Firms, including iPhone maker Apple Inc, Qualcomm Inc and Nvidia Corp all rely on TSMC and other Asian foundries to manufacture their chips.

The dual shocks of the novel coronavirus pandemic, which disrupted chip supply chains, and Beijing’s’ move to strengthen its control over Hong Kong have prompted alarm in Washington over having advanced chip manufacturing concentrated in Taiwan, a U.S. ally across a narrow strait from China, which has spent billions of dollars bolstering its domestic chip manufacturing industry.

TSMC last month said it plans to build a factory in Arizona.

Reporting by Stephen Nellis in San Francisco and Alexandra Alper in Washington; Editing by Leslie Adler, Alistair Bell, Diane Craft and Aurora Ellis