TLDRs;
Contents
- US Senate raises semiconductor tax credits from 25% to 35% to boost domestic chip production.
- Intel, TSMC, and Micron stand to benefit if they expand U.S. facilities before 2026.
- The measure builds on the 2022 CHIPS and Science Act and awaits House approval.
- Global competition heats up as the U.S. counters Asian and European chip subsidy programs.
The United States Senate has approved a sweeping measure to boost domestic semiconductor manufacturing by raising tax credits for chipmakers to 35 percent.
Passed on July 1, the bill represents a significant increase from the current 25 percent credit and surpasses the earlier proposal of 30 percent, signaling Washington’s urgency in strengthening the country’s technological self-sufficiency.
Senate Raises the Stakes in Global Chip Race
The enhanced tax incentives are aimed at companies such as Intel, TSMC, and Micron, provided they expand their U.S. operations before a 2026 deadline. This move builds on the CHIPS and Science Act enacted in 2022, which offered $39 billion in grants and an additional $75 billion in loans to revitalize America’s semiconductor sector.
The latest bill is part of a broader policy package designed to reshape the industrial landscape amid growing concerns about global supply chain vulnerabilities and strategic competition with China.
While the measure has cleared the Senate, it still requires reconciliation with a different version previously passed by the House of Representatives. President Donald Trump, who has supported the expansion despite previously criticizing the CHIPS Act, has called on lawmakers to finalize the bill before the July 4 holiday, signaling rare bipartisan consensus on a key issue of national competitiveness.
Tax Incentives Highlight Bipartisan Strategy for Chip Security
The push to reshore chip production reflects a long-standing bipartisan priority to ensure that the United States remains a global leader in critical technologies. Federal involvement in the semiconductor industry dates back decades, notably with the 1987 launch of Sematech, a public-private consortium aimed at boosting U.S. manufacturing capabilities.
More recently, the Obama administration’s advisory council proposed a strategy to reinforce innovation and defend against aggressive foreign industrial policies.
Although each administration has taken a different approach, favoring a mix of grants, tax credits, or trade measures, the underlying goal has remained constant, to reduce America’s dependence on overseas fabrication, particularly from East Asia. The Senate’s move to increase tax credits demonstrates how policy tools can be recalibrated across administrations to pursue the same strategic objective.
Tariffs and Incentives Create Uncertainty
While the 35 percent credit is likely to attract fresh investment into U.S. manufacturing, it comes amid an uncertain regulatory environment. The Trump-led push also involves a separate investigation into potential tariffs on foreign-made chips. Industry analysts warn that the dual policy of offering incentives while threatening trade restrictions could create complications for companies with global supply chains.
According to research cited by analysts, even modest tariffs could inflate production costs significantly, particularly for advanced chip fabrication facilities, which often require multi-billion-dollar investments. This makes the U.S. policy environment a careful balancing act for multinational firms like TSMC that operate across regions.
Global Chip Race Intensifies as Supply Chain Risks Loom
The Senate’s latest move adds new momentum to the global race for semiconductor supremacy. Similar efforts are underway in the European Union, which recently launched its own Chips Act worth €43 billion, and in South Korea, where policymakers aim to capture a sizable share of the global system chip market by 2047.
At the core of these efforts lies the fear of another pandemic-era shortage, especially in mature-node chips that are essential for industries ranging from automotive to consumer electronics.
While the increased subsidies may encourage near-term investment, there are concerns that they could also lead to fragmentation in the traditionally integrated global chip ecosystem.
