The United States Innovation and Competition Act

Earlier in June, the U.S. Senate passed the U.S. Innovation and Competition Act (USICA) which proposes significant changes to science and technology policy. This behemoth $250 Billion Bill was backed by a strong bipartisan 68-32 majority and is aimed at bolstering innovation and competitiveness against ChinaComposed of a variety of bills coming out of the committees on Commerce, Science, and Transportation, Foreign Relations, Homeland Security and Governmental Affairs, Banking, Housing, and Urban Affairs, Health, Education, Labor, and Pensions, and the Judiciary, the United States Innovation and Competition Act (USICA) promises to define the United States’ increasingly intense competition with China to lead the economies of the world through the 21st century.

Notable Provisions

As mentioned, the Act contains content from different bills in a range of areas: infrastructure, hard research, trade, law enforcement, and others. But a few of the Act’s components have drawn a bulk of the attention since it was introduced. Let’s take a closer look at why.

Endless Frontier Act

The Endless Frontier Act’s (EFA) main accomplishment will be the establishment of a Directorate of Technology and Innovation at the National Science Foundation. The EFA allocates a total of $81 billion for the National Science Foundation, $29 billion of which is to be directed toward the new Directorate of Technology and Innovation (DTI).

The stated aim of the DTI will be the creation of new technologies, and the improvement of existing technologies, in crucial areas of cutting-edge research, including artificial intelligence, high-performance computing, and advanced manufacturing. It will also attempt to help commercialize these technologies for the benefit of the overall United States economy and American businesses.

The EFA establishes ten “focus areas” for the National Science Foundation:

  1. Artificial intelligence, machine learning, autonomy, and related advances
  2. High-performance computing, semiconductors, and advanced computer hardware and software
  3. Quantum information science and technology
  4. Robotics, automation, and advanced manufacturing
  5. Natural and anthropogenic disaster prevention or mitigation
  6. Advanced communications technology and immersive technology
  7. Biotechnology, medical technology, genomics, and synthetic biology
  8. Data storage, data management, distributed ledger technologies, and cybersecurity, including biometrics
  9. Advanced energy, industrial efficiency technologies including batteries, and advanced nuclear technologies including for the purposes of electric generation
  10. Advanced materials science, including composites and 2D materials

The EFA also authorizes the Department of Commerce to designate “regional technology hubs” to help incubate innovation and technology development and disseminate new technologies across the United States. This strategy will include the awarding of grants to facilitate the regional development of technology innovation around the country.

The Act allocates $10 billion over 5 years for the creation of these regional technology hubs.

Finally, the EFA requires the Department of Commerce to develop a “supply chain resiliency and crisis response” program to combat supply chain gaps and vulnerabilities in crucial industries.

Creating Helpful Incentives to Produce Semiconductors for America Fund

The USICA establishes the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund at the Department of the Treasury. The Act appropriates $24 billion for the CHIPS for America Fund which, among other things, encourages investment in the fabrication, testing, and packaging of semiconductors in the United States.

The Act also creates the CHIPS for America Defense Fund, which funds defense industry-specific developments in the defense and intelligence communities, and the CHIPS for America International Technology Security and Innovation Fund, which funds information and communication security and supply chain strengthening activities. Make sure to read our article on the re-building of the U.S. Semiconductor Industry and how this impacts the economic development world in particular, along with 1,000 Semiconductor producers to watch to learn more about industry shortage.

Strategic Competition Act of 2021

The Strategic Competition Act of 2021 authorizes the United States State Department to help United States companies mitigate the influence of China on their international supply chains. It would establish the Infrastructure Transaction and Assistance Network, which would assist Indo-Pacific nations in the development of their infrastructures, and the Digital Connectivity and Cybersecurity Partnership, which would assist nations in the creation, expansion, and strengthening of digital infrastructure.

Additional allocations would be made to combat Chinese disinformation campaigns and to assist in the establishment of independent Chinese media. It would also allocate $300 million to counter the global influence of the Chinese Communist Party through the Countering Chinese Influence Fund.

Opportunity, Conflict, and Competition

As with any proposed legislation of this size and scope, the USICA has been the subject of considerable praise and criticism. Reasonable people are at odds over everything from the national security implications of policy confrontations with China to the wisdom of direct government intervention in specific tech sectors.

Regardless of the lively debates, however, it is clear that, the United States Innovation and Competition Act will have a dramatic impact on a variety of industries and businesses both inside and outside the United States.

1) First, it is designed to create substantial opportunities for companies operating within the 10 scientific “focus areas” established by the Endless Frontier Act. Those opportunities could come in the form of direct grants, interest-free or reduced-interest loans, participation in one of the regional technology hubs, or the exploitation of newly developed technologies.

2) Second, companies involved in the development of semiconductors could see significant incentives arise for state-side fabrication of semiconductors and related technology via the CHIPS for America Fund.

3) Third, any company, high-tech or otherwise, that does business with or through China will feel an immediate impact on their business. Everything from regulatory compliance to supply chains will need to be addressed as the China-focused USICA becomes law. The exact shape that those additional efforts will take will depend on the nature of each business, the industry they’re in, and the scope of their involvement with China-based organizations.

Those impacts could be exacerbated if China responds with its own, anti-US legislation in retaliation for what it will undoubtedly perceive as a provocation by the American government.

Finally, there are undoubtedly nuances in the Act that have yet to be discovered. Because the USICA incorporates so many bills from so many committees there will likely be unintended consequences and interactions that come to light as government and industry become more familiar with the legislation.

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