US Senate passes CHIPS bill with semiconductor funding

The US Senate passed the CHIPS bill with a 64-33 vote July 27, representing a significant step forward for the legislation that includes $52 billion in funding to boost domestic semiconductor manufacturing and US competitiveness in the technology industries.

"As Americans are worried about the state of the economy and the cost of living, the CHIPS bill is one answer: it will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers," President Joe Biden said in a statement issued by the White House "It will mean more resilient American supply chains, so we are never so reliant on foreign countries for the critical technologies that we need for American consumers and national security.

A version of the bill, which has been referred to by many different names such as the COMPETES Act, was passed by the House of Representatives in February. The legislation has since been stalled and modified in the Senate over several months.

The Senate's version of the bill will now return to the House for another vote before being sent to Biden for final approval.

Politicians and industry leaders have continually urged Congress to pass the CHIPS bill and its related funding to ease the disruptions in US supply chains caused by the global semiconductor shortage, which has tripped up production in multiple industrial sectors since late 2020.

The Semiconductor Industry Association said the Senate passage of the CHIPS Act "marks decisive progress toward strengthening America's economy, national security, and leadership in the key technologies of today and tomorrow," according to a July 27 statement.

"The share of modern semiconductor manufacturing capacity located in the US has decreased from 37% in 1990 to 12% today," the SIA added. "This decline is largely due to substantial manufacturing incentives offered by the governments of our global competitors, placing the US at a competitive disadvantage in attracting new construction of semiconductor manufacturing facilities."

Impact on steel, aluminum sectors

The automotive industry has notably suffered ongoing production outages, amid surging demand for new cars, due to a lack of semiconductor computer chips that are critical for technological and safety systems in modern vehicles.

Inconsistent vehicle production has slashed demand expectations for steel and aluminum producers that supply the automotive industry, one of the major end markets for metals.

Steelmaker Cleveland-Cliffs' said its shipments in the second quarter dipped 13% year over year to 3.6 million st as it continued to be impacted by slow demand recovery in the automotive sector, according to a July 22 earnings statement.

Consequently, metal industry associations such as the American Iron and Steel Institute have consistently pushed Congress to get the CHIPS bill passed.

"Addressing the chip supply challenges faced by US automakers in recent years will also boost the entire automotive supply chain, to which the steel industry is a major supplier," AISI CEO Kevin Dempsey said in a recent statement. "As with steel, domestic manufacturing of microchips is essential to ensuring that the United States maintains a strong manufacturing base, which is essential to our national and economic security."