Chip designers tackle US bill despite big benefits for Intel

July 18 (Reuters) – Major US chip companies on Monday began moving to support a package of chip industry support despite earlier concerns that legislation awaiting a Senate vote disproportionately benefits manufacturers such as Intel Corp. (INTC.O).

Senate Majority Leader Chuck Schumer told lawmakers that a vote could come as early as Tuesday on a package of watered-down bills to support the US computer chip industry, after Democratic lawmakers split it from a larger and more controversial bill.

The bills aim to make the United States more competitive in the face of a rising China, whose chip industry has grown rapidly over the past five years to account for nearly 10% of global sales.

The measures include $52 billion in support and tax credits for investment to boost US manufacturing. The bills have bipartisan support. Powerful Republican Senator John Cornyn said on Twitter Sunday that the bill’s actions have a “green light” after Democrats scaled back their ambitions over unrelated spending bills.

But a rift has emerged last week within the chip industry itself, with some players concerned that the final language of the legislation would provide disproportionate support to manufacturers like Intel while doing little to support chip designers like Advanced Micro Devices Inc. (AMD.O)Qualcomm you (QCOM.O) And Nvidia Inc (NVDA.O).

Intel, along with companies such as Texas Instruments (TXN.O) Micron Technology Co (MU.O)and design and manufacture its own chips. Such companies would benefit from $52 billion in CHIPS subsidies to build factories as well as an investment tax credit to purchase tools for use within their factories through another measure called FABS.

Intel said earlier this year it would spend $20 billion on a plant in Ohio after opening two new plants in Arizona last year. Read more

AMD, Qualcomm and Nvidia design their own chips, but tap partners to manufacture them and see no direct benefit from subsidies to build factories or tax subsidies for gadgets.

They support a separate version of the FABS law introduced in the US House of Representatives that contains both a manufacturing tax credit and a tax credit for chip design activities that would directly benefit them.

This version of the FABS law — more satisfactory to a larger group of chip-making players — is also the version that the Semiconductor Industry Association, which represents US chip companies, called on lawmakers to pass.

“We are encouraged that the legislation is moving forward, and we continue to support the enactment of $52 billion in CHIPS investments and a FABS investment tax credit for both manufacturing and design,” the association said in a statement Friday.

Current Senate legislation does not contain a design tax credit. An SIA spokesperson said Monday that major chip design firms have told the association they do not plan to oppose the bill on the issue, and an AMD spokesperson said Monday that the company supports the current legislation.

Nvidia declined to comment, and Qualcomm and Intel did not respond to requests for comment.

The lack of a tax credit for chip design prompted some US companies, who asked not to be named for fear of industry and government backlash, to debate their support for the Senate bill if the final language introduced did not include a tax credit for two people familiar with the matter said.

“You have Intel you could get $20 billion with CHIPS plus $5 billion or $10 billion under FABS. So $30 billion goes to your direct competitor, and you don’t get a penny? That’s going to cause problems in the marketplace,” a person at A company discussing its position on the bill, spoke on condition of anonymity because the person is not authorized to speak to the press.

“Only a few companies will benefit,” said a person at a second company who discussed its support for a bill without design credits that was not authorized to speak to the press.

Additional reporting by Stephen Nellis in San Francisco; Editing by Leslie Adler

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