Biden will require chip companies benefiting from subsidies to share surplus profit – 02/28/2023 – Market

The Biden administration said this Tuesday (28) that it will require companies benefiting from its semiconductor research and manufacturing program to share in excess profits.

The Commerce Department earlier announced its plans to begin accepting applications for a $39 billion industry grant program in late June. The law also creates a 25% investment tax credit for building chip factories.

The law plays a central role in the Biden administration’s effort to bring semiconductor manufacturing back to the United States. The success of the venture is vital to the country’s 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 boost domestic production.

Companies receiving more than $150 million in direct funding under the program “will be required to share with the US government a portion of any cash flows or returns that exceed the applicant’s projections by an agreed limit,” the Department of Commerce.

The folder expects that the “shared value will only be material in cases where the project significantly exceeds cash flow or return projections, and will not exceed 75% of direct financing”.

Companies that obtain funding are also prohibited from using semiconductor proceeds for dividends or share buybacks and must provide details of any five-year share buyback plans.

Companies seeking more than $150 million in direct funding must submit a plan for how they will provide “affordable” child care for workers.

The Semiconductor Industry Association said it was carefully reviewing the document that “sets out the rules for companies to apply for subsidies”.

Commerce Secretary Gina Raimondo noted that benefiting companies will be required to enter into agreements that restrict their ability to expand semiconductor manufacturing in foreign countries of US concern, such as China, for ten years after obtaining funding.