Senate Passes Bill Increasing Tax Credits for Chipmakers to 35%

In a significant move to bolster domestic semiconductor manufacturing, the Senate has passed a bill that increases tax credits for chipmakers from 25% to 35%. This legislation aims to incentivize companies like Intel, Micron, and Taiwan Semiconductor Manufacturing Company to establish new manufacturing plants within the United States. The goal is to shift a substantial portion of the world's advanced chip production from Asia to the U.S. by a 2026 deadline.

This latest bill is part of a broader effort by the Trump administration to support domestic chipmaking. Earlier initiatives, such as the 2022 CHIPS and Science Act, provided $39 billion in grants and $75 billion in loans. The new bill offers a more sustainable incentive through long-term tax breaks, which are seen as more attractive than temporary financial assistance.

The final version of the bill, which was initially proposed with a 30% credit, was amended to provide a 35% tax credit. This increase is intended to give semiconductor companies more financial flexibility for their costly U.S. projects. The bill now faces a critical test in the House of Representatives, where it must secure approval before becoming law.

House Republicans are divided over the Senate's version of the bill. Speaker Mike Johnson is under pressure to maintain party unity, as the vote margins are extremely tight. Any loss of more than three Republican votes could jeopardize the bill's passage. Several Republicans, including Andy Ogles from Tennessee and Ralph Norman from South Carolina, have expressed opposition to the Senate's text. Others, like Thomas Massie from Kentucky and Warren Davidson from Ohio, who voted against the earlier House version, are expected to vote no again. Andy Harris from Maryland, who chairs the House Freedom Caucus, has not taken a clear stance, adding to the uncertainty.

Trump's approach to boosting domestic chip production contrasts with the Biden administration's CHIPS Act, which focused on grants. Trump has called for the repeal of the CHIPS Act and has instead proposed tariffs on semiconductor imports. This strategy aims to pressure companies to avoid unpredictable trade costs by accelerating their U.S. projects. Major players in the semiconductor industry, such as TSMC, Nvidia, Micron, and GlobalFoundries, have already increased their U.S. projects to take advantage of the new tax credits before the 2026 deadline.

The Senate passed the bill with a tie-breaking vote from Vice President JD Vance. However, the real challenge lies in the House, where no Democrats are expected to support the bill. With growing Republican objections, the bill's future is uncertain. Trump has set a deadline of Independence Day for the House to pass the bill, but the narrow vote margins make this goal increasingly difficult to achieve. If even four Republicans vote no, the bill will fail, and the 35% tax credit will not become law.