Senate's "Big Beautiful" Act Turbocharges US Chip Industry with Enhanced Tax Incentives

The Senate's approval of the "Big Beautiful" Act brings a significant boost to chip manufacturers in the United States. Under this new legislation, companies initiating the construction of new facilities by 2026 will be eligible for a 35% investment tax credit, substantially exceeding the current law's provision of a 25% credit.

This substantial tax relief represents a marked increase from the 30% credit proposed in earlier drafts of the "Big Beautiful" bill. While the legislation has met criticism from clean energy and electric vehicle sectors, it promises considerable benefits for semiconductor companies such as Intel, Taiwan Semiconductor, and Micron Technology, incentivizing their investment in the US manufacturing sector.

Previously, the current chip legislation, signed into law by former President Joe Biden in August 2022, allocated $54.2 billion in federal investments along with a 25% tax credit to bolster semiconductor manufacturing and technological innovation. The "Big Beautiful" Act, by enhancing these provisions, aims to further strengthen the competitive edge of the US semiconductor industry.

A noteworthy aspect of the Senate version of the tax credit is its lack of a maximum limit. This provision could surpass other subsidy forms depending on how well the chip legislation stimulates industry investment. Therefore, this incentive stands to offer substantial advantages to companies not receiving direct funding from prior acts, with major beneficiaries including Intel, Taiwan Semiconductor, Micron Technology, and Samsung Electronics.

The semiconductor market reflected optimism following the bill's passage. The PHLX Semiconductor Index, which had fallen sharply by 2.1% during early trading, moderated its losses and closed with a smaller decline of 0.7%. Intel experienced a notable midday surge exceeding 3%, peaking at a rise of approximately 3.4% before closing with a gain of about 2%.