Senate Majority Leader Chuck Schumer (D-N.Y.) is preparing to hold a vote on a narrow version of the Senate's expansive China competitiveness bill, focusing solely on emergency funding and a new tax credit for the semiconductor industry, a source familiar with his plans tells Axios.

Why it matters: Schumer is cutting bait — at least for now — on the broader U.S. Innovation and Competitiveness Act (USICA), with a compromise on the sweeping package becoming increasingly unlikely before Congress breaks for its August recess.

• The billions in funding for the semiconductor industry is a crucial and immediate priority for the Biden administration to help combat inflation and deal with supply chain issues.
• The White House urged Congress this week to work within the realm of what's possible and focus on passing a limited measure now.

Between the lines: The move to slice off CHIPS funding (Creating Helpful Incentives to Produce Semiconductors) comes after Senate Minority Leader Mitch McConnell (R-Ky.) announced his intent to hold USICA hostage if Democrats simultaneously pursued a path toward reviving its ambitious Build Back Better package.

• Schumer and Sen. Joe Manchin (D-W.Va.) have been making progress on passing a scaled-down version of the package through a reconciliation process that would only require Democratic votes to pass.
• McConnell, however, did say Tuesday he's open to spinning off the chips part of the bill.
• On Wednesday, Axios scooped that the Biden administration was ready to take McConnell's off-ramp, and told senators as much during a closed-door briefing later that afternoon.

The other side: Immediately after the news broke that Schumer wants to vote on a slimmed-down version, a key Republican said he and other GOP senators aren't on board — potentially jeopardizing the vote.

• "We're not going to vote to get on a CHIPS bill as long as the sword of Damocles of reconciliation is hanging out there," Sen. John Cornyn (R-Texas), a McConnell lieutenant who has been integral in crafting the bill, told reporters.
• A Senate GOP leadership aide told Axios that McConnell has been clear he would only be open to a measure focusing solely on CHIPS funding, and argued they see Schumer's proposal as "CHIPS-plus," given it includes an investment tax credit.
• Schumer also left the door open to adding other provisions if they're ready by Tuesday.