Five key parts of the Senate’s sweeping China competitiveness bill

The Senate is poised to approve bipartisan legislation Tuesday afternoon that would invest billions to put the U.S. on more even footing with China on a range of emerging technology issues, including addressing the semiconductor shortage and funding critical research.

The bill still faces pushback from a number of Senate Republicans who argue it is not strong enough to confront China, though the level of opposition is unlikely to derail the package, which will need to pass the House before it can be sent to President Biden’s desk. Voting in the Senate is slated to start about 4 p.m. Tuesday.

Here are five key components of the U.S. Innovation and Competition Act.

Bill marks turning point in addressing semiconductor shortage

The legislation is poised to inject funding and attention into the struggling U.S. semiconductor industry in the midst of a major shortage that has brought certain sectors, including automobile manufacturing, to a standstill.

The bill would invest about $52 billion into semiconductor production, marking a major step toward allowing the U.S. to compete in all facets of production on the global stage and help end a shortage that has forced General Motors and Ford to temporarily shutter plants.

Senate Majority Leader Charles Schumer (D-N.Y.), a lead sponsor of the legislation, has stressed the importance of funding chip manufacturing amid the shortage, saying last month that the bill would “make sure the United States stays on the cutting edge” of production.

The U.S. is a key player in the semiconductor industry, but federal funds for manufacturing have been lacking compared with other nations involved in chip production.

“The U.S. has more of the semiconductor market than anyone else, and we lead in design, which is how we make new chips. Where we don’t lead is fabrication, and that has moved to Taiwan,” Jim Lewis, a senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies, told The Hill on Monday.

“If we are serious about getting fabrication back in the United States … we have to use subsidies,” he said.

The Semiconductor Industry Association (SIA) — which represents companies such as Intel, IBM, Micron and Qualcomm — has pushed for passage of the legislation.

SIA President and CEO John Neuffer said in a statement to The Hill that “we simply need to be doing more chip research, design, and manufacturing on U.S. shores.”

“Other countries’ governments have made huge investments to attract chip manufacturing and research,” Neuffer said. “The semiconductor funding … would help level the global playing field and ensure more of the chips our country needs are made in America, which would benefit U.S. workers, businesses, and consumers alike.”

Invests billions to compete with China on critical research and development

Included in the massive 1,445 page text is Schumer and Sen. Todd Young’s (R-Ind.) original bill, the Endless Frontier Act, which would provide about $81 billion to the National Science Foundation to serve as an adrenaline shot to help surpass China on research and development in technology and innovation.

“The one place that China has had an advantage over the U.S. is the Chinese are willing to spend money. We have been flat in our spending for more than a decade,” said Lewis.

“So if we are going to compete with them, we are going to have to match them,” he added.

The Senate bill also includes a provision to address the threat of Beijing’s theft of research and technology by saying intellectual property developed by the National Science Foundation is prohibited from being transferred to foreign entities of concern, such as China.

In addition to massive funding, the bill would lay out clear priorities for the National Science Foundation on areas where the U.S. is in the most critical competition with China.

Mark Montgomery, senior director of the Center on Cyber and Technology Innovation with the Foundation for Defense of Democracies, called the funding levels “appropriate” and noted the necessity of this legislation.

“The absence of all of this would be detrimental to our ability to compete with the Chinese and create a level playing field for our companies to prosper,” he said.

One of the most significant components of the bill is the creation of a new division at the National Science Foundation, called the Directorate of Technology and Innovation, that would be focused on developing new technologies and providing investment in fostering domestic talent to carry out this research. It would receive $29 billion over five years.

“That is an exciting way in which we’ll see a longer life cycle of research that the federal government is investing in,” said Debbie Altenburg, senior research policy expert with the Association of Public and Land-grant Universities.

“It’s a large investment in scholarships and fellowships and at multiple levels — community colleges, undergraduate and graduate studies — we’re making sure to invest in domestic talent,” she added.

Other focus areas in the bill include advancing knowledge of supercomputing and robotics, and developing its hardware; innovation in advanced communications; advancing bio- and medical technology, genomics and synthetic biology; and biometrics, data storage and management. This portion of the bill would receive an estimated $26.2 billion over four years.

Takes a stance against escalating foreign cyberattacks

Key provisions in the bill reflect the need to defend the U.S. against foreign cyber threats following recent ransomware attacks like those against Colonial Pipeline and beef producer JBS USA.

The legislation incorporates the Cyber Response and Recovery Act, which would establish a fund to allow the Department of Homeland Security to provide support to companies hit by cyberattacks.

It also includes $500 million over five years for the State Department to establish a program assisting other nations to increase secure internet access and cybersecurity.

The Senate is taking up the measure amid growing concerns on Capitol Hill around cyber threats following debilitating ransomware attacks on key groups, along with major cyber breaches such as the SolarWinds incident that compromised nine federal agencies.

“Why everyone is surprised that we are being whacked over the head routinely by China and Russia is a little bit baffling. We are going to have to do something different on cyber if we are going to get this under control,” Lewis said of the cyber provisions.

5G gets a boost

A major concern during the course of the Trump administration was China’s potential leadership in the field of fifth generation, or 5G, wireless technologies.

In order to help the U.S. compete with China, the bill includes $1.5 billion for a Commerce Department fund that would spur the build out of neutral broadband technologies, which would put a damper on efforts by Chinese telecommunications companies Huawei and ZTE to build out 5G networks.

The Trump administration took a series of steps to penalize both companies, and the Biden administration has largely kept them in place, with politicians on both sides of the aisle citing national security concerns around the companies ties to China’s government. Both companies have strongly denied they pose any kind of national security threat to the U.S.

The legislation also includes a provision banning the Commerce secretary from removing Huawei from the “entity list,” which effectively blacklists the company, without certifying that it no longer poses a threat. Huawei was added to the list by the Trump administration, in addition to being designated a national security threat by the Federal Communications Commission.

Montgomery argued that while the bill’s provisions are necessary, more is needed to help the U.S. address concerns around 5G rollout.

“It can’t just be money. This is a good first start, this funding is important, but it’s got to be combined with a serious effort to make sure that international standards setting groups … allow for a fair and open marketplace for U.S. technology,” he said.

Bipartisan package still faces strong GOP criticism

Republicans have made attacking the Biden administration’s approach to China a key election issue ahead of the 2022 midterms, aiming to frame the president’s policy toward Beijing as failing to protect American interests.

GOP opposition to the bill is unlikely to derail passage, but it still provides an opportunity for congressional Republicans to hit Democrats on confronting Beijing.

The Republican Study Committee, the largest GOP caucus in Congress with 154 members, is one of the loudest voices arguing that the bill falls short on addressing China’s theft of intellectual property.

Rep. Jim Banks (Ind.), head of the Republican Study Committee, attacked the legislation as a “boondoggle that’s going to help the Chinese,” in an interview with Breitbart over the weekend.

Sen. Marco Rubio (R-Fla.), during last month’s Senate vote to advance the bill, called Beijing’s theft of U.S. intellectual property a “horror show” in remarks on the Senate floor.

A spokesperson for Sen. Ron Johnson (R-Wis.), a vocal opponent of the bill, criticized the legislation as wrongly distributing funds to the government over the private sector.

“China is obviously a growing threat, but I don’t believe any government allocates capital as efficiently as the private sector,” Alexa Henning told The Hill. “This bill will increase government’s influence over the private sector while weakening America and making us less competitive by increasing our debt. Democrats love spending other people’s money and growing government. I have no idea why any Republican would want to help them do that.”

Alternately, Sen. Bernie Sanders (I-Vt.) last month criticized the bill as providing profitable private chip manufacturing companies with far too much taxpayer dollars.

“As part of the Endless Frontiers bill we should not be handing out $53 billion in corporate welfare to some of the largest and most profitable corporations in the country with no strings attached,” he tweeted.

Lewis, of the Center for Strategic and International Studies, said despite GOP opposition to the bill, failing to pass the legislation would have serious repercussions.

“The Chinese would decide that we aren’t a serious competitor if the bill doesn’t go through,” he said. “They have a belief that the U.S. can’t get its act together.”