Senate Passes Bill Offering 35% Tax Credit for U.S. Semiconductor Factories

The U.S. Senate has passed a comprehensive tax and spending bill, known as the "One Big Beautiful Bill ACT," which includes significant incentives for semiconductor companies. The final version of the bill offers a 35% investment tax credit for companies that commence construction of new semiconductor factories in the U.S. before the 2026 deadline set by the existing semiconductor law. This tax credit is substantially higher than the current 25% credit and the 30% proposed in earlier drafts of the bill.

The existing semiconductor law, signed into legislation by the on August 9, 2022, provides a 25% investment tax credit for semiconductor investments over the next five years. The law also allocates 542 billion dollars in federal funding for the semiconductor industry and open wireless access network innovation activities. Additionally, it earmarks 1699 billion dollars for scientific and research and development activities in other cutting-edge fields. The goal is to enhance the competitiveness of the U.S. semiconductor manufacturing industry and foster innovation in critical areas such as aerospace and defense.

The Senate's final version of the bill does not cap the investment tax credit, making it potentially more costly than other forms of subsidies. The cost will depend on the scale of industry investment stimulated by the semiconductor law. Regardless, this tax credit is expected to provide a strong incentive for any company, including those that did not receive semiconductor law funding. The primary beneficiaries of the funding include major semiconductor manufacturers such as Intel, TSMC, Micron Technology, and Samsung Electronics.

Following the Senate's passage of the bill, the overall decline in semiconductor stocks during the midday trading session in the U.S. eased. The Philadelphia Semiconductor Index, which had fallen 2.1% earlier in the day, nearly erased its intraday losses, ultimately closing down 0.7%. TSMC's U.S.-listed shares, which had fallen more than 2% in the morning, closed down 0.8%. Micron Technology, which had fallen more than 3% in the morning, closed down 1.9%. Intel's shares, which had risen more than 3% at midday, closed up approximately 2%.