WASHINGTON, Feb 28 (Reuters) – The Biden administration said on Tuesday it would ask companies that get funding from its $52 billion U.S. semiconductor manufacturing and research program to share excess profits and explain how they plan to provide affordable childcare.
The Commerce Department on Tuesday released plans to begin accepting applications in late June for a $39 billion manufacturing subsidy program. The law also creates a 25% investment tax credit for building chip factories worth an estimated $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 stay ahead of China in global markets. Semiconductor companies have already announced more than 40 new projects, including nearly $200 billion in private investment to increase domestic production.
Recipients who receive more than $150 million in direct funding “will be required to share with the U.S. government a portion of any cash flow or return that exceeds the applicant’s projections by an agreed threshold,” the department said in its notice. of financing.
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Commerce expects “benefit sharing will only be material where the project significantly exceeds its expected cash flow or returns, and will not exceed 75% of the recipient’s direct funding award” .
Companies that obtain funding are also prohibited from using token funds for dividends or share buybacks, and must provide details of any plans to buy back their own shares over five years.
The department will review the applicant’s “undertakings to refrain from share buybacks in the application review process” in a five-step application.
Democratic lawmakers noted that America’s biggest semiconductor companies have invested hundreds of billions of dollars in stock buybacks in recent years, with Intel (INTC.O) spending more than $100 billion on buybacks since then. 2005. Intel also pays a dividend.
Commerce Secretary Gina Raimondo said businesses must submit a plan that includes an outline of labor needs. Applicants seeking direct funding of more than $150 million must submit “a plan for how they will provide affordable and accessible child care to their workers.”
White House economic adviser Heather Boushey said the announcement “is emblematic of the use of public incentives to simultaneously deliver the construction of strategic supply chains for our economic and national security while investing in our care infrastructure”.
Applicants must address six program priority areas, including plans “to engage in future investments in the U.S. semiconductor industry, including building R&D facilities in the United States.”
Applicants must also “create opportunities for minority, veteran and women-owned businesses; demonstrate climate and environmental responsibility; invest in their communities by addressing barriers to economic inclusion; and s ‘commit to using iron, steel and building materials produced in the United States.’
The Semiconductor Industry Association said it was carefully reviewing the funding notice which “sets out rules of conduct for companies to apply for CHIPS Act manufacturing grants.”
Most direct funding awards should be between 5% and 15% of the project’s capital expenditures. Commerce said it generally expects the total amount of an award, including the loan or loan guarantee, to not exceed 35% of the project’s capital expenditure.
“We will do our own due diligence. We will not write blank checks to any company that asks for it,” Raimondo said. “We are forcing companies to open their books.”
The Initial Funding Opportunity seeks applications for projects involving advanced, current-generation, and mature-node semiconductors. It will post funding opportunities for semiconductor materials and manufacturing equipment facilities in late spring and one for R&D facilities in the fall.
Raimondo noted that companies that win awards will be required to enter into agreements limiting their ability to expand semiconductor manufacturing capacity in foreign countries of concern like China for 10 years after securing funding. They may not engage in joint research or technology licensing efforts with a foreign entity of concern that involves sensitive technologies.
“We will be releasing very detailed regulations in the coming weeks that will give businesses a clearer idea of what the red lines are,” Raimondo said Monday ahead of the announcement.
Reporting by David Shepardson; Editing by Chris Sanders, Robert Birsel, Lisa Shumaker and Mark Porter
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