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Bipartisan group of senators propose 25% tax credit for chips manufacturing

Riley Beggin
The Detroit News

Washington — A bipartisan group of senators, including Michigan Sen. Debbie Stabenow, D-Lansing, introduced a bill Thursday that would create a permanent 25% investment tax credit for semiconductor chip manufacturing. 

The tax credit would apply to investments in both manufacturing equipment and facilities and could only be used for buildings or tools that haven't yet been used to produce chips, according to a Senate Finance Committee summary of the legislation

General Motors is storing Chevrolet Traverses and Buick Enclaves which are missing semiconductors because of the global shortage on a Michigan State University lot at East Mt. Hope Road and Farm Lane in East Lansing on Thursday, May 6, 2021.

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It's one of several moves recently to improve American manufacturers' access to semiconductor chips, which are used in computers, phones, cars and more. A global shortage of chips due to fallout from the coronavirus pandemic has forced shutdowns at auto plants and prompted policymakers to reexamine U.S. companies' dependence on foreign sources for the crucial component. 

“For months, Michigan workers and manufacturers have experienced the harsh effects of the semiconductor chip shortage. Plants have been forced to shut down, and workers have been laid off," Stabenow said in a statement. 

Last week, the Senate passed a bill that would funnel $52 billion toward domestic chip manufacturing, including $2 billion for "legacy" chips that are used in the auto industry. "Today, we continue that work," Stabenow said. "This new legislation will take an additional step in helping American manufacturers make semiconductor chips here at home so this shortage won’t happen again."

Stabenow introduced the bill alongside Democratic Sens. Ron Wyden of Oregon and Mark Warner of Virginia and Republican Sens. Mike Crapo of Idaho, John Cornyn of Texas and Steve Daines of Montana. 

The chip shortage began late last year after a confluence of the pandemic, winter storms in the United States and a fire at a chip factory in Japan created a backlog of chip orders. Industry analysts AlixPartners estimate the shortage could cost the industry $110 billion globally and 3.9 million vehicles that would have otherwise been produced. 

It's prompted shift reductions and shutdowns at plants across the country and the globe. It's also pushed vehicle prices up and reduced choices for prospective car buyers. 

The Semiconductor Industry Association released a statement Thursday praising the legislation, arguing tax credits are a necessary incentive to spur production. 

"Boosting domestic chip manufacturing and research will keep America on top in semiconductors, which underpin the game-changing technologies of today and tomorrow,” said John Neuffer, president and CEO of the association, adding they “look forward to working with Congress and the Biden administration to strengthen domestic chip production and research, which are critical to U.S. job creation, national defense, infrastructure, and semiconductor supply chains.” 

While the shortage is expected to drag on for months, experts agree there's not much policymakers can do in the short term. In the long term, bolstering domestic production could give U.S. automakers and other companies some insurance they won't face a similar shortage in the future — though some experts have also warned against creating too much capacity in response to the scare.

Early in his term, President Joe Biden ordered a 100-day review of the semiconductor supply chain, among others. Last week, the administration released its report and established a task force designed to respond to the short-term supply chain challenges.

Twitter: @rbeggin