Chip companies benefit, the Senate version of the "Big Beautiful" bill provides more tax incentives for building factories in the U.S

The large-scale tax reduction and spending bill passed by the U.S. Senate this Tuesday—referred to as the "Big Beautiful" bill—has been criticized by the clean energy and electric vehicle industries, but it brings benefits to some chip manufacturers, as it allows these companies to receive more tax incentives for investing in factories in the United States.

Media reports indicate that according to the final version of the "Big Beautiful" bill passed by the Senate, chip companies such as Intel, TSMC, and Micron Technology will be eligible for a 35% investment tax credit if they start construction on new factories in the U.S. before the 2026 deadline proposed in the existing CHIPS and Science Act ("CHIPS Act"). This rate far exceeds the 25% credit stipulated in the current CHIPS Act and is also higher than the 30% proposed in earlier drafts of the "Big Beautiful" bill.

The current CHIPS Act was signed into law by former U.S. President Biden on August 9, 2022. It explicitly states that over the next five years, the U.S. federal government will provide a total of $54.2 billion in financial grants and a 25% investment tax credit for the U.S. semiconductor industry and open wireless access network innovation activities, as well as a total of $169.9 billion in financial grants for scientific and research activities in other cutting-edge fields, in order to enhance the competitiveness of the U.S. semiconductor manufacturing industry and the innovation capabilities of other key sectors such as aerospace.

Media reports point out that the tax credits proposed in the Senate's final version have no cap, and their cost is likely to exceed that of other forms of subsidies—depending on the scale of investment stimulated by the CHIPS Act. In any case, this tax credit will almost certainly provide the largest share of incentives to any company, including those that did not receive grants from the CHIPS Act. The main beneficiaries of the grant program include Intel, TSMC, Micron Technology, and Samsung Electronics.

After the Senate passed the "Big Beautiful" bill, during the midday trading session, the overall decline in chip stocks eased, with the Philadelphia Semiconductor Index, which had dropped 2.1% earlier in the day, nearly erasing its intraday losses and ultimately closing down 0.7%.

TSMC, which had fallen over 2% earlier, closed down 0.8%, while Micron Technology, which had dropped over 3%, closed down 1.9%. Intel's midday gains expanded to over 3%, rising about 3.4% at one point, and ultimately closed up about 2%.