U.S. hearing on China competition told research funding falling behind

David Brunnstrom and Michael Martina
·2-min read
FILE PHOTO: U.S. Sen. Maria Cantwell (D-WA) speaks during a news conference

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By David Brunnstrom and Michael Martina

WASHINGTON (Reuters) -U.S. investment in research and development has reached its lowest level in decades while soaring in the rest of the world, the head of a U.S. Senate committee warned at a hearing on proposed subsidies to the tech industry to help the United States better compete with China.

Senate Commerce committee chair Maria Cantwell told the committee on Wednesday the proposed "Endless Frontier Act" had been the stimulus for a big debate about America's competitiveness.

Federal investment in research and development is at its lowest in 45 years when measured against GDP, Cantwell said.

"This comes as international competition is increasing, and other nations are ready to challenge our position on the world's innovation stage."

The ranking member of the committee, Republican Senator Roger Wicker, said it appeared the intent of the legislation was to help America compete with China, but that the United States would not beat China by copying its "top-down program" of research and investment and government subsidies.

"Strategic investments in technologies and supply chains are important, but we will not win by simply throwing money at the problem," Wicker said. "We could actually end up doing harm if recipients of funding through this concept lack the capacity and capability to conduct R&D activities that are actually useful."

The Endless Frontier Act was first proposed in 2020 calling for $110 billion over five years to advance U.S. technology efforts, co-sponsored by Senate Democratic Leader Chuck Schumer and Republican Senator Todd Young.

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Schumer also wants to move legislation on boosting U.S. semiconductor production. Both proposals could total $200 billion, congressional aides said.

President Joe Biden has proposed a sweeping infrastructure investment plan that could provide funds for semiconductors, though it is unclear just how the various funding initiatives will be ironed out between the administration and Congress.

Biden has also sought solutions to a chip shortage that has squeezed U.S. automakers competing against the sprawling consumer electronics industry for chip supplies.

Several U.S. tech industry groups on Wednesday wrote to Congress and White House officials urging them to not set aside new semiconductor manufacturing capacity for older chips as part of appropriations for the CHIPS for America Act, another plan to boost U.S. semiconductor supply chains.

The letter signals a growing rift between the two U.S. industries, with tech companies arguing that reserved capacity for legacy chips used by automakers would be market distorting.

"The competition among the rest of America's chip-consuming industries for this artificially tightened chip supply will translate into higher costs for companies and their customers, including American taxpayers," the letter from the tech lobbies, including the Information Technology Industry Council, said.

(Reporting by David Brunnstrom and Michael Martina Editing by Chris Sanders and David Holmes)