Semiconductor legislation failures show why the U.S. struggles to compete

It may seem strange to focus on semiconductors at a time when the country is reeling from so many other blows: a conservative Supreme Court that’s dictating extreme laws on guns and abortion rights; a Republican Party that won’t disavow a coup plot by its leader. Unfortunately, these big issues can’t be fixed by a hyper-partisan Congress. But this technology challenge is one that can. It’s a “makeable putt,” as golfers say.

When a bipartisan group of senators first proposed the semiconductor legislation more than two years ago, they described it as an urgent fix for a big strategic problem — the United States’ eroding position against China in design and manufacture of advanced computer chips. The need for federal research dollars to compete with China Inc. in this critical technology was one of the few issues on which Republicans and Democrats agreed.

At first, the momentum seemed irresistible. The Senate approved what it called the Chips Act in June 2021 by a wide margin, 68 to 32. The bipartisan infrastructure bill passed the Senate not long after, and in that moment, which now seems very long ago, it appeared that Biden might be able to deliver on his promise of making the political system work again to solve important problems.

But then something strange happened. Rather than pocket the win, the House dithered and delayed on Chips for eight months, much as it did on the infrastructure package. When the House finally passed its own version in February, it was substantially different from the Senate bill. A huge, 107-member conference committee was appointed in April to reconcile the two bills; it didn’t meet until May.

But Democrats understood that this was urgent, right? Sen. Maria Cantwell (D-Wash.), the chair of the Senate team, said when the conference began that the Chinese technology challenge was a shock like the Soviet’s race into space in 1957. “I believe this is a Sputnik moment, where it is clear to Americans that we are falling behind on innovation, and we can’t risk falling further behind,” she said.

Biden echoed that urgency. “Pass the damn bill and send it to me,” he said during a May visit to Ohio, where chipmaker Intel had said it would expand a planned $20 billion fabricating plant to $100 billion if it could get congressional support. But this president, for whatever reason, has failed to mobilize the House Democratic caucus and transform his rhetoric of action into reality.

The House conference moved at the speed of molasses, not microchips. Progressives had some quibbles. But the real problem was that the bipartisan bill was too popular. Because members knew that it was likely to pass, they attached pet projects, creating a “Christmas tree” effect similar to what happens with defense authorization bills. Biden and Speaker Nancy Pelosi (D-Calif.) should have stopped this process, but they didn’t.

“We need more urgency,” Sen. Mark R. Warner (D-Va.), one of the original drafters of the bill, told me. “If we don’t move quickly, the GOP will delay it to next year.” Several tech CEOs I spoke with said they don’t want more delay. But can the Democrats get this done?

The House leadership had initially talked of completing work on the bill by May. That deadline slipped to the end of June, which obviously won’t be met, and Congress is running out of time before the August recess. “There is no reason that we should not pass this bill through Congress in July,” Pelosi and Senate Majority Leader Chuck Schumer said in a joint statement last week. No reason, that is, except inertia, incompetence and internecine war.

What makes this story truly disturbing is that while Congress has been dithering, other countries are racing to pass their own industrial policies to invest in chipmaking. India told one chipmaker that if a $10 billion incentive wasn’t enough, it should just name the amount. The European Union began working on its own semiconductor plan last year, a year after the U.S. legislative effort began. Industry executives tell me it’s ready to go.

That’s the takeaway: The European Union, supposedly a bureaucratic morass, got started a year after the United States in building this essential pathway to the future. It is now comfortably ahead.

Come on, Mr. President: Get it done. Crack some heads. You can’t fix everything in our messed-up country. But you can deliver on your promise to create good high-tech jobs in the semiconductor industry and compete with China for the strategic high ground.