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U.S. Senators Propose 25% Tax Credits for Domestic Chipmakers

Qualcomm
(Image credit: Qualcomm)

A bipartisan group of U.S. senators proposed on Thursday a 25% tax credit for investments in chip production in the country. The proposal is an addition to the $52 billion semiconductor industry funding plan approved by U.S. legislators last week, showing a large push to boost support for domestic chipmakers.

The Facilitating American-Build Semiconductors (FABS) Act proposes a 25% investment tax credit for investments in semiconductor manufacturing facilities and in production of fab tools. 

Currently, only 12% of global chip output is made in the U.S., down from 37% in 1990. Meanwhile, the vast majority of chips are designed in the U.S. Bringing at least some of the chip production back to the U.S. could create tens of thousands of well-paid jobs. 

However, building semiconductor production facilities is expensive. A state-of-the-art fab tends to cost well over $10 billion, so companies like Intel or TSMC usually receive significant incentives from governments to build fabs in Israel, Ireland and Taiwan. By contrast, the U.S. government (unlike state governments) has been reluctant to provide substantial compensations, until now.

"As much as 70% of the cost difference for producing semiconductors overseas is driven by foreign subsidies, rather than comparative advantages," U.S. Senator Mike Crapo (R-Idaho), one of the senators who proposed the act, said in a statement. 

There are a number of companies from the U.S. that have developed chips in the country and sell them to local clients, including Intel and Micron, that will welcome the tax incentives. In fact, foreign companies, like TSMC and Samsung Foundry, which are on track to build advanced fabs in the U.S. in the next couple of years, would also benefit from the act. Furthermore, fab tool producers, like Applied Materials and LAM Research, would also take advantage of tax credits.

"Our bill would provide a significant investment tax credit to companies that build chips here at home, rather than overseas," U.S. Senator Ron Wyden (D-Oregon) said. "The United States can't allow foreign governments to continue to lure companies' manufacturing overseas, increasing risks to our economy and costing American workers good-paying jobs." 

The Semiconductor Industry Association (SIA) and SEMI have applauded the proposed law.

Increasing chip production in the U.S. clearly has its potential benefits, but virtually all U.S.-based semiconductor companies assembly and test their products in South East Asia. As a result, even with some chip manufacturing moving to the U.S., the industry will continue to rely on Asian chip packaging and testing facilities.

The FABS Act is co-proposed by Crapo, Ryden and U.S. Senators John Cornyn (R-Texas), Mark Warner (D-Virginia), Steve Daines (R-Montana) and Debbie Stabenow (D-Michigan). 

  • ezst036
    Tax cuts for the wealthy
    Reply
  • spongiemaster
    Are any of them paying any taxes now? 25% of nothing is still nothing.
    Reply
  • TJ Hooker
    ezst036 said:
    Tax cuts for the wealthy
    Basically another small step in the race to the bottom.
    Reply
  • Ninjago97
    You guys don't get it. If the US doesnt subsidize certain critical industries, they will never exist in the US, and the US will always be at the mercy of foreign governments. Tech independence is a must.
    Reply
  • 2Be_or_Not2Be
    Ninjago97 said:
    You guys don't get it. If the US doesnt subsidize certain critical industries, they will never exist in the US, and the US will always be at the mercy of foreign governments. Tech independence is a must.

    "Increasing chip production in the U.S. clearly has its potential benefits, but virtually all U.S.-based semiconductor companies assembly and test their products in South East Asia. As a result, even with some chip manufacturing moving to the U.S., the industry will continue to rely on Asian chip packaging and testing facilities."

    You need to get the whole supply chain , if you want full "independence" from non_US mfg.
    Reply
  • maik80
    spongiemaster said:
    Are any of them paying any taxes now? 25% of nothing is still nothing.
    True. 25% off zero
    Reply
  • CooliPi
    Ninjago97 said:
    You guys don't get it. If the US doesnt subsidize certain critical industries, they will never exist in the US, and the US will always be at the mercy of foreign governments. Tech independence is a must.

    We (outside the US) got it a long time ago. The US is exporting free trade soup, but only if it is in favour of US business, not vice versa. Any state that relies on critical technology from overseas is at the mercy of some other entity. From money (not creating its own money), to IT, to whatever technology. Now they got caught into their own trap - the race to the bottom has made domestic chip manufacturing uncompetitive price-wise. So, the US has turned to good old protectionism, like scaring people with rendered motherboards with a pimple leading to protectionism against the overseas technology leaders. The slaves (who were expected to be slaves fo eternity) have gotten together and created something technologically competitive, cheap and the best at the time.

    US is not playing fair its foreign policy and this is just an example of its shortsightedness. It fires back.

    Ninjago97 is right, but it's universally true - any government is at the mercy of makers of unsubstituable technology. Funny part is, the US cannot make even smarter (more lethal) killer drones if it doesn't manufacture its brains at the newest technology node - this is the motivation behind luring foreign companies to build hi-tech fabs there. To build autonomous killer vehicles. The US doesn't give a damn about its people, neither foreign.

    We from Europe can be a bit jerky at free trade discussions now - because the US starts to implement socialism (which is European name for these policies). But hey, socialism for the rich and free trade soup for the poor has dominated US policy for 40 years, maybe forever... eat your own ****
    💩
    Reply
  • Why_Me
    CooliPi said:
    We (outside the US) got it a long time ago. The US is exporting free trade soup, but only if it is in favour of US business, not vice versa. Any state that relies on critical technology from overseas is at the mercy of some other entity. From money (not creating its own money), to IT, to whatever technology. Now they got caught into their own trap - the race to the bottom has made domestic chip manufacturing uncompetitive price-wise. So, the US has turned to good old protectionism, like scaring people with rendered motherboards with a pimple leading to protectionism against the overseas technology leaders. The slaves (who were expected to be slaves fo eternity) have gotten together and created something technologically competitive, cheap and the best at the time.

    US is not playing fair its foreign policy and this is just an example of its shortsightedness. It fires back.

    Ninjago97 is right, but it's universally true - any government is at the mercy of makers of unsubstituable technology. Funny part is, the US cannot make even smarter (more lethal) killer drones if it doesn't manufacture its brains at the newest technology node - this is the motivation behind luring foreign companies to build hi-tech fabs there. To build autonomous killer vehicles. The US doesn't give a damn about its people, neither foreign.

    We from Europe can be a bit jerky at free trade discussions now - because the US starts to implement socialism (which is European name for these policies). But hey, socialism for the rich and free trade soup for the poor has dominated US policy for 40 years, maybe forever... eat your own ****
    💩
    The US offered the EU a zero tariff trade agreement for all goods twice in the past three years and both times the EU turned it down seeing how the EU is screwing the US on tariffs. The EU is a protection racket.
    Reply
  • CooliPi
    Why_Me said:
    The US offered the EU a zero tariff trade agreement for all goods twice in the past three years and both times the EU turned it down seeing how the EU is screwing the US on tariffs. The EU is a protection racket.

    I agree. We even have inter-state limits on the production of some essential items, like food production etc. EU is a confederation of wildly different states, some are so strong that they could wipe the weaker ones economically in a year - just by trading without protection for the poor. Protection of the poor is one of the building blocks of the EU.

    The EU is a protection hell (just next to France, nobody can even compute how much are their farmers subsidized), but thinking of it, how could we keep it together without protection? The EU can't withstand the US version of free trade, so can't many other states. There's a lesson in this story about cutting taxes - the US should taste it's own trade policy. Like standing up to the free competition from China. They've (the US) created it. Greed was more than love for thy neighbour. Now they're facing it from the other side. They've created an unscrupulous Frankenstein out of China.

    I don't have anything against the US(except for the foreign policy as commented by Noam Chomsky), quite the opposite, we should cooperate as much as possible. But free trade ain't for us, we're protected by trade barriers in the European fort. As long as we can produce our high quality goods and sell it to the domestic market, it works. Free trade (meaning with no barriers for trade) accelerates the race to the bottom, eventually killing all the local technology centers. Examples - Lenovo buying laptop division from IBM, Lenovo bying mobile division from Motorola, etc...

    Just FYI, we're producing CooliPi, the mammoth heatsink and coolercase for the Raspberry Pi 4. We are proud to manufacture it in EU, using only connectors from a German company (which eventually manufactures in China). The price is quite high thanks to its monster size, and second - we don't outsource it to Asia. It's hard to convince people to buy something of high quality/high price, when they see ultra cheap stuff on Amazon and daily buy from Wall-Mart. Quality disappears along with falling prices undercut by (free trade) competition. And manufacturers of high-end stuff need low-end too, to pay for the expenses, and to have acces to the crowd of customers.
    Reply
  • samopa
    German gov willing to subsidized $9 million out of $25 million cost to build a fab, and US Gov only proposed 25% tax cut ?
    No wonder Intel choose to build their next Fab in German ...
    Reply