The U.S. Commerce Department said late on Friday it will limit the size of government subsidizes for semiconductor manufacturing and will not let firms use funding to “pad their bottom line,” Reuters reports.
On Thursday, the U.S. House of Representatives gave final approval to legislation that provides $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 Friday told chips companies awards will be “no larger than is necessary to ensure the project happens here in the United States” and added it will discourage “race-to-the-bottom subsidy competitions between states and localities.”
Congressional Progressive Caucus chair Pramila Jayapal said the group backed the legislation after lengthy negotiations with Commerce Secretary Gina Raimondo after the group expressed concerns chips companies would use funding for stock buybacks or pay dividends.
A caucus spokeswoman said Friday “progressives were able to vote for the bill yesterday, confident that the department would be ensuring the funding could not be used for corporate self-enrichment.”
Commerce said applicants must supply detailed financial information and projections for proposed projects and capital investment plans: “The department will go over these with a fine-tooth comb and make sure that companies are not padding their models to ask for outsized incentives.”
A Commerce Department spokesperson declined to comment beyond the web posting.
The department vowed to “give preference in awards to companies who commit to make future investments that grow the domestic semiconductor industry … and not engage in stock buybacks.”
The legislation does not prohibit stock buybacks by companies receiving government funding but does prohibit the use of grant funds for the buybacks.
Companies winning funding will be prohibited for 10 years “from engaging in significant transactions in China or other countries of concern involving any leading-edge semiconductor manufacturing capacity or material expansions of legacy semiconductor manufacturing capacity designed to export to the U.S. and other countries.”
Also, the United States and Japan launched a new high-level economic dialogue on Friday aimed at pushing back against China and countering the disruption caused by Russia’s invasion of Ukraine.
The two long-time allies agreed to establish a new joint research center for next-generation semiconductors during the so-called economic “two-plus-two” ministerial meeting in Washington, Japanese Trade Minister Koichi Hagiuda said.
U.S. Secretary of State Antony Blinken, U.S. Commerce Secretary Gina Raimondo, Japanese Foreign Minister Yoshimasa Hayashi and Hagiuda also discussed energy and food security, the officials said in a news briefing.
“As the world’s first- and third-largest economies, it is critical that we work together to defend the rules-based economic order, one in which all countries can participate, compete and prosper,” Blinken told the opening session.
Hagiuda said “Japan will quickly move to action” on next-generation semiconductor research and said Washington and Tokyo had agreed to launch a “new R&D organization” to establish a secure source of the vital components.
The research hub would be open for other “like-minded” countries to participate in, he said.
The two countries did not immediately release additional details of the plan, but Japan’s Nikkei Shimbun newspaper earlier said it would be set up in Japan by the end of this year to research 2-nanometer semiconductor chips. It will include a prototype production line and should begin producing semiconductors by 2025, the newspaper said.
“As we discussed today, semiconductors are the linchpin of our economic and national security,” said Raimondo, adding that the officials had discussed collaboration on semiconductors, “especially with respect to advanced semiconductors.”
Taiwan now makes the vast majority of semiconductors under 10 nanometers, which are used in products such as smart phones, and there is concern about the stability of supply should trouble arise involving Taiwan and China, which views the island as a renegade province.
The United States and Japan said in a joint statement they would work together “to foster supply chain resilience in strategic sectors, including, in particular, semiconductors, batteries, and critical minerals.” They vowed to “build a strong battery supply chain to lead collaboration between like-minded countries.”