Senators propose a tax credit for US-based chip manufacturers

A bipartisan group of senators has introduced a bill that would give a 25% tax credit to semiconductor manufacturers in the US.

Members of the Senate Finance Committee announced the Facilitating American-Built Semiconductors (FABS) Act on Thursday. It would award the credit for domestic investments made in semiconductor manufacturing facilities and tools.

Co-sponsored by Senators John Cornyn (R-Texas), Mark Warner (D-Va.) Steve Daines (R-Mont.), and Debbie Stabenow (D-Mich.), FABS would help to bring semiconductor manufacturing facilities to the US.

"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. We look forward to working with our colleagues to get this done," said Ron Wyden (D-Ore.), head of the Committee.

The Committee warned that while US semiconductor companies still dominate the sector, accounting for almost half of all revenues, semiconductor manufacturing has fled overseas. Asia now produces three-quarters of semiconductors, it said.

The Semiconductor Industry Association (SIA) has found the US share of global semiconductor manufacturing capacity has fallen from 37% in 1990 to 12% today.

This proposed legislation follows the introduction of the CHIPS for America Act, which called on congressional leaders to fund US semiconductor manufacturers.

CHIPS for America didn't allocate financial incentives for domestic suppliers, but it must be funded through separate legislation. In June, Congress took a step towards that when Senators passed the United States Innovation and Competition Act (USICA), also known as the Endless Frontier Act.

USICA allocated $52 billion to boost domestic chip production over the next five years to fund the domestic chip production provisions in the CHIPS act.

SIA praised the introduction of the FABS Act. "Senate approval last week of funding for domestic chip production and innovation in USICA marked a significant step forward," said the SIA's board chair Bob Bruggeworth. "The FABS Act would build on that momentum and help ensure the U.S. can meet the strong global semiconductor demand and maintain leadership in critical technologies."