Sunday, July 21, 2024

Biden demands that the winning chip companies share the excess profits

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WASHINGTON (Reuters) – The Biden administration said on Tuesday it would ask companies winning money from its $52 billion semiconductor research and manufacturing program to share excess profits and explain how they plan to provide affordable childcare.

Ministry of Commerce on Tuesday She released her plans To begin accepting applications in late June for the $39 billion manufacturing support program. The act also created a 25% investment tax credit for building chip factories valued at $24 billion.

The CHIPS Act plays a central role in the Biden administration’s efforts to bring semiconductor manufacturing back to the United States. Its success is vital to US ambitions to catch up with China in global markets. Semiconductor companies have already announced More than 40 new projects including nearly $200 billion In private investments to increase domestic production.

Recipients receiving more than $150 million in direct funding, the department said in its funding notice, “will be required to share with the U.S. government a portion of any cash flows or returns that exceed the applicant’s expectations up to an agreed limit.”

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Commerce anticipates that “positive participation will be material only in cases where the project significantly exceeds expected cash flows or returns, and will not exceed 75% of the recipient’s direct funding award.”

Funding winning companies are also prohibited from using chip money for dividends or share buybacks, and must provide details of any plans to buy back their shares over five years.

The department will consider an applicant’s “obligations to refrain from repurchasing shares in the application review process” in a five-step application.

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Democratic lawmakers note that the largest US semiconductor companies have poured hundreds of billions of dollars into stock buybacks in recent years, with Intel (INTC.O) spending more than $100 billion on buybacks since 2005. Intel also pays a dividend. .

Commerce Secretary Gina Raimondo said companies must submit a plan that includes an outline of workforce needs. Applicants seeking more than $150 million in direct funding must submit a “plan for how they will provide affordable and accessible childcare for their workers.”

White House Economic Adviser Heather Boshey said the announcement “symbolizes the use of public stimulus to simultaneously deliver strategic supply chain building for our economic and national security while also investing in care infrastructure.”

Applicants must address six priority areas for the program including plans to “commit to future investment in the US semiconductor industry, including building research and development facilities in the US.”

Applicants must also “create opportunities for minority-owned, veteran-owned, and women-owned businesses; demonstrate climate and environmental responsibility; invest in their communities by addressing barriers to economic inclusion; and commit to the use of U.S.-produced iron, steel, and building materials.”

The Semiconductor Industry Association stated that it was carefully reviewing the funding notice that “sets out the rules of the road for companies to apply for manufacturing grants under the CHIPS Act.”

Most direct funding awards are expected to be between 5% and 15% of the project’s capital expenditure. Commerce said it generally expects the total amount of a grant, including a loan or loan guarantee, to not exceed 35% of the project’s capital expenditure.

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“We will do our own efforts,” said Raimondo. “We don’t write blank checks to any company that asks for it.” “We’re getting companies to open their books.”

This seed funding opportunity is seeking applications for projects involving edge semiconductors, current generation, and mature node. It will launch funding opportunities for semiconductor materials and manufacturing equipment facilities in the late spring and one for research and development facilities in the fall.

Raimondo noted that award-winning companies will be required to enter into agreements that restrict their ability to expand semiconductor manufacturing capacity in foreign countries of interest such as China for a period of 10 years after winning the financing. They cannot participate in any joint research or technology licensing efforts with a relevant foreign entity involving sensitive technologies.

“We will be releasing very detailed regulations in the next few weeks that will give companies a clearer idea of ​​the red lines,” Raimondo said on the Monday before the announcement.

David Shepardson News. Editing by Chris Sanders, Robert Purcell, Lisa Shumaker, and Mark Porter

Our standards: Thomson Reuters Trust Principles.

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