U.S. senators propose 25% tax credit for semiconductor manufacturing

[June 18, 2021]  By David Shepardson

WASHINGTON (Reuters) - A bipartisan group of U.S. senators on Thursday proposed a 25% tax credit for investments in semiconductor manufacturing as Congress works to increase U.S. chip production.

An Intel Tiger Lake chip is displayed at an Intel news conference during the 2020 CES in Las Vegas, Nevada, U.S. January 6, 2020. REUTERS/Steve Marcus/File Photo

The proposal sponsored by Senate Finance Committee Chairman Ron Wyden and the top Republican on the panel, Senator Mike Crapo, along with Senators Mark Warner, Debbie Stabenow, John Cornyn and Steve Daines, would provide "reasonable, targeted incentives for domestic semiconductor manufacturing," they said in a statement.

The group did not immediately provide a cost estimate for the measure, which is on top of recent proposed semiconductor funding. Last week, the Senate approved $52 billion for production and research on semiconductors and telecommunications equipment. That included $2 billion dedicated to chips used by automakers, which have seen massive shortages and made significant production cuts. The House of Representatives must still act on the measure.

Supporters of funding note the U.S. share of semiconductors and microelectronics production has fallen to 12% from 37% in 1990.

The senators said up to 70% of the cost difference for producing semiconductors overseas results from foreign subsidies.

"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," Wyden said.

U.S. Commerce Secretary Gina Raimondo said last month the funding could result in seven to 10 new U.S. semiconductor plants.

Raimondo anticipates government funding would generate "$150 billion-plus" in investment in chip production and research - including contributions from state and federal governments and private-sector firms.

The tax credit could benefit Taiwan Semiconductor Manufacturing Co (TSMC) <2330.TW>, which is building a $12 billion semiconductor factory in Arizona, and Dutch chipmaker NXP Semiconductors NV as well as U.S. firms such as Intel Corp and Micron Technology Inc.

The Semiconductor Industry Association praised the proposal, saying it said would "strengthen domestic chip production and research, which are critical to U.S. job creation, national defense, infrastructure, and semiconductor supply chains."

(This story corrects Reuters Instrument Code for TSMC)

(Reporting by David Shepardson, Editing by Franklin Paul, Cynthia Osterman and Jonathan Oatis)

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