Measure in defense bill seeks to curb China’s lead in computer chip production

A provision in the Pentagon policy bill working its way through Congress would ease environmental reviews to build some new computer chip factories, a measure meant to make the U.S. competitive against China in an area critical to national security.

The bipartisan measure was tacked onto the National Defense Authorization Act in the Senate.

“Right now the American economy, the American military, is potentially in real jeopardy from China being able to exercise a stranglehold over those semiconductors,” Sen. Ted Cruz, the Texas Republican who co-authored the amendment, told The Washington Times. 

It would allow semiconductor manufacturing projects to skip environmental reviews under the National Environmental Policy Act depending on how much funding a project has received under the CHIPS and Science Act. 

The latter measure, which was signed into law by President Biden a year ago, intends to lure companies to the U.S. to produce microprocessor chips and thereby reduce America’s reliance on imported chips and foreign supply chains. 

This was one area where Mr. Cruz and Mr. Biden saw eye to eye.

Mr. Cruz warned that one of the greatest vulnerabilities the country faces is “our dependence on foreign producers of advanced semiconductors.”

Many of the semiconductors that the U.S. imports, which are used in a wide variety of electronics and military vehicles, come from Taiwan or China. 

Under the provision in the NDAA, if a project receives more than 10% in federal funding, then a NEPA review would be led by the Department of Commerce, the agency overseeing the CHIPS Act. A project that triggers a review would also get “several exemptions” from the review process. 

The same bill in the House also enjoys bipartisan support. The House version was introduced by Rep. Jen Kiggans, Virginia Republican.

Though it wasn’t included in the House version of the NDAA, the computer chip amendment is expected to be adopted when the final version is hammered out in a House-Senate conference committee in September.

Using the NDAA as a vehicle to advance the measure made sense, said Mr. Cruz, because nearly every military vehicle, advanced military weapon, radars and planes use semiconductors.

“Without those semiconductors, the American economy grinds to a halt,” He said. “And it could potentially cripple our ability to defend ourselves because so much of the vehicles and weapons that we rely on, not to mention the advanced computers and sensing apparatus and all the rest, all of that depends upon those advanced semiconductors.”

Democrats historically rebuked Republican attempts to change or reform NEPA. However, they may be keener to reforming the decades-old rule after backing the semiconductor amendment. Sen. Mark Kelly, Arizona Democrat, co-sponsored the legislation.

“This amendment reflected a significant shift for Democrats, and it’s meaningful, and I think a big part of the reason is that there are multiple Democrats in the Senate who appreciate the national security imperative of fixing this problem, and who also have significant semiconductor projects proposed in their states,” Mr. Cruz said. 

Democrats’ appetite to change NEPA also appears to be building outside of the upper chamber. The White House released a draft rule aimed at speeding up the NEPA permitting process for projects related to the Biden administration’s climate policy goals last month. 

The rule, known as the Bipartisan Permitting Reform Implementation Rule, would streamline the permitting process for a bevy of projects from electric vehicle charging infrastructure to offshore wind to wildfire management. It would require projects to consider the cumulative environmental impact in a project area. 

A year has passed since the CHIPS and Science Act was signed into law by Mr. Biden, but the $52 billion in incentive money for semiconductor manufacturers has yet to be disbursed.  

The Department of Commerce said has received over 460 statements of interest for the funding since the program was launched earlier this year. The White House this week touted $166 billion in private investments in semiconductor manufacturing and development in the year since the law was enacted. 

Much of the investment to build semiconductor manufacturing facilities is dependent on federal funding from the CHIPS Act coming through. The Department of Commerce expects to send awards to projects “later this year” that have capital below $300 million or less.

“We’ve come a long way, but there’s plenty of work to still be done,” Commerce Secretary Gina Raimondo said. “If we do this right, we will once again lead in manufacturing and the innovation that grows from it. We will foster a new generation of innovators who will write the next chapter in our history.”

Correction: An earlier version of this story mislabeled the amendment by Sen. Ted Cruz.