US says it will limit the size of semiconductor chip concessions

Semiconductor chips are seen on a computer circuit board in this illustration taken on February 25, 2022. REUTERS/Florence Lo/Illustration

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WASHINGTON, Jul 29 (Reuters) – The U.S. Commerce Department said on Friday it will limit the size of government subsidies to semiconductor manufacturing and not allow companies to use the funding to “increase their bottom line”.

On Thursday, the US House of Representatives gave final approval to legislation providing $52 billion in government funding to boost semiconductor manufacturing and research. President Joe Biden is expected to sign the legislation early next week.

The Commerce Department said on Friday that chip companies’ premiums “will not be greater than necessary to ensure the project takes place here in the United States” and added that it will discourage “subsidy competition between states and localities.”

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Congressional Progressive Caucus Chair Pramila Jayapal said the group supported the legislation after lengthy negotiations with Secretary of Commerce Gina Raimondo after the group expressed concerns that chip companies would use the funding for share buybacks or pay dividends. .

A spokeswoman for the caucus said on Friday that “progressives were able to vote on the bill yesterday, confident that the department would ensure the funding could not be used for corporate self-enrichment.”

Commerce said applicants must provide detailed financial information and projections for proposed projects and capital investment plans: “The department will review this with a fine-tooth comb and ensure companies are not filling in their templates to ask for disproportionate incentives.”

A Commerce Department spokesperson declined to comment beyond the web post.

The department promised to “give preference in awards to companies that commit to making future investments that grow the domestic semiconductor industry … and do not engage in share buybacks.”

The legislation does not prohibit share buybacks by companies that receive government funding, but it does prohibit the use of grant funds for buybacks.

Companies that obtain funding will be prohibited for 10 years “from engaging in significant transactions in China or other countries of interest involving any high-end semiconductor manufacturing capacity or material expansions of legacy semiconductor manufacturing capacity designed to export to the US.” and other countries”.

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Reported by David Shepardson Edited by Chris Reese

Our Standards: The Thomson Reuters Trust Principles.

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