Could $52 Billion In Emergency Funding End The Automotive Chip Shortage?

The auto industry may have caught a break with a new bipartisan bill that has been assembled by Senate Majority Leader Chuck Schumer, D-N.Y., that calls for $52 billion in emergency funding for semiconductor chips.

The chip shortage has put a snag in the auto industry’s ramp up after being paused for several months due to the impact of the pandemic. As the COVID crisis ceased its nonessential production, chips were diverted to tech devices as consumers stayed home and needed computer equipment to support their remote work habits.

Now that automakers are back online, chip demand is in full swing, but suppliers are unable to meet the needs of the industry, forcing Ford, GM, Honda, Toyota, and others to temporarily shut down plants, delay deliveries, and cut production.

And in some instances, vehicles are being produced without the chips, decreasing their overall gas mileage.

Now Schumer has filed the U.S. Innovation and Competition Act of 2021 as a substitute amendment to the Endless Frontier Act.

The bill includes more than 20 bipartisan amendments that include the Menendez-Risch Strategic Competition Act of 2021, the Brown-Toomey Meeting the China Challenge Act of 2021.

Input was also provided from the Senate Homeland Security and Government Affairs Committee, HELP Committee, Judiciary Committee, and Appropriations Committee.

Under the new act, there is $52 billion in emergency funding that will be used to implement the CHIPS Act that was part of the 2020 National Defense Authorization Act – a program that supports legacy chip production for the auto industry, military, and other critical industries.

Another $1.5 billion is earmarked for the implementation of the USA Telecommunications Act - part of last year’s National Defense Authorization Act that will be used to support the venture towards 5G.

“The U.S. Innovation and Competition Act of 2021 will jumpstart American competitiveness and make one of the most significant government investments in American innovation and manufacturing in generations,” Schumer said in a statement.

He continued by saying, “This legislation will allow the United States to out-compete countries like China in critical technologies like semiconductors, create good-paying American jobs and help improve our country’s economic and national security.”

According to CNBC, the bill has support from both Democrats and Republicans as it looks to take on China to overcome the global chip shortage in the auto industry, among other markets.

If passed, the act would also provide $81 billion for the National Science Foundation through fiscal 2026; authorize $16.9 billion for the Department of Energy for research, development, and energy-related supply chains; and authorize $10 billion for NASA.

“This legislation will set our country on the path to out-innovate, out-produce and out-compete the world in the industries of the future," Schumer said Monday from the Senate floor.

“So far, this bill has flown a bit under the radar. But it is an incredibly important piece of legislation. At its core, the U.S. Innovation and Competition Act is about maintaining America’s role as the global economic leader. Few issues could be more important.”

The expansive act, which is over 1,400 pages long, could pass the Senate this week, according to Schumer.