The U.S. Innovation and Competition Act: Senate Passes Sweeping $250 Billion Bill to Bolster Scientific Innovation and Compete With China

On Tuesday, June 8, 2021, the U.S. Senate adopted by a 68-32 vote S. 1260, the United States Innovation and Competition Act, a nearly 2,400-page, $250 billion bill designed to boost U.S. semiconductor production, scientific research, development of artificial intelligence, and space exploration in the face of growing economic, technological, and military competition from China.

Senate Majority Leader Charles Schumer, D-N.Y., called the bill a “once-in-a-generation investment in American science and American technology.” The bipartisan bill, sponsored by Sens. Schumer and Todd Young, R-Ind., would invest more than $200 billion into U.S. scientific and technological innovation over the next five years. A centerpiece of the bill is a $52 billion allotment to spur the domestic production of semiconductors. Seventy-five percent of the world’s chips today come from Asia, while the share of semiconductors manufactured in the United States has fallen from 37% in 1990 to 12% today. And against the backdrop of a global semiconductor shortage since last summer, which has particularly affected U.S. producers of cars, cellphones, and video games, supporters of the legislation emphasized the importance of shoring up domestic supplies of semiconductors, which Sen. Maria Cantwell, D-Wash., called the “oil of the 21st century.”

Another $80 billion will be spent on research into artificial intelligence, robotics, and biotechnology, as well as $1.5 billion to boost innovation in such wireless technologies as 5G and 6G. $23 billion will be spent on the advancement of space exploration. $10 billion will be invested in new technology hubs throughout the country, outside familiar hotspots such as Silicon Valley. The Endless Frontier Act, now just one part of the overall bill, overhauls the National Science Foundation (NSF), appropriates tens of billions for the NSF, and establishes a Directorate for Technology and Innovation.

Beyond investments in scientific research and development, the bill includes various national security measures designed to thwart cyberattacks, foreign infiltration of domestic supply chains, and exfiltration of U.S. intellectual property, with a particular focus on threats from China. Key provisions include

  • a requirement that the administration impose economic sanctions on Chinese entities that knowingly undermine U.S. cybersecurity or engage in the theft of trade secrets
  • a provision for Committee on Foreign Investment in the United States (CFIUS) review of certain foreign gifts to or contracts with higher education institutions
  • authorization of $1.5 billion for the Countering Chinese Influence Fund and a requirement that the United States develop strategies to counter Chinese influence in various specific regions throughout the world
  • an amendment to the Uyghur Human Rights Policy Act of 2020 to require the imposition of sanctions against individuals responsible for serious human rights abuses in Xinjiang
  • authorization to the Secretary of State to determine that an alien is inadmissible if it enters the United States to steal emerging technologies on behalf of an adversarial foreign government
  • prohibition of the use of TikTok on federal government devices
  • Buy American procurement preferences for all public infrastructure spending, ensuring that spending on public infrastructure goes only to products made in the USA

The bill now heads to the House of Representatives, where members are promoting additional ideas to bolster U.S. competitiveness in science, respond to Beijing’s alleged human-rights abuses, and call for a diplomatic boycott of the Winter Olympics in China in 2022. The House is expected to take up those bills in late June or July.

The United States Innovation and Competition Act includes within it seven major divisions or acts. Please follow the links below to find a more detailed analysis of each of these seven parts of the Senate’s proposed bill:

Division A – CHIPS Act and ORAN 5G Emergency Appropriations 
Division B – Endless Frontier Act
Division C – Strategic Competition Act of 2021 
Division D – Homeland Security and Governmental Affairs Committee Provisions
Division E – Meeting the China Challenge Act of 2021
Division F – Other Matters
Division G – Trade Act of 2021: Forced Labor, Censorship, Consumer Protection, Supply Chain Resiliency, and Tariffs

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.