US Chips Act Mandates Contenders To Share Excess Profits With Country, Refrain From Buybacks And China

The U.S. today launched the first CHIPS for America funding opportunity for manufacturing incentives to restore U.S. leadership in semiconductor manufacturing, support good-paying jobs across the semiconductor supply chain, and advance U.S. economic and national security.  

It will require recipients of more than $150 million in direct funding to share a portion of any cash flows or returns that exceed the applicant’s projections above an established threshold with the U.S. government. 

Applicants requesting over $150 million in direct funding must also submit plans to provide their facility and construction workers access to affordable, accessible, reliable, and high-quality child care. In addition, applicants are strongly encouraged to use project labor agreements for construction projects.

U.S. barred companies winning funding from using chips funds for dividends or stock buybacks.

As part of the bipartisan CHIPS and Science Act, the Department of Commerce oversaw $50 billion to revitalize the U.S. semiconductor industry, including $39 billion in semiconductor incentives. 

The first funding opportunity sought applications for projects to construct, expand, or modernize commercial facilities to produce leading-edge, current-generation, and mature-node semiconductors. 

The Department will also release a funding opportunity for semiconductor materials and equipment facilities in the late spring and one for research and development facilities in the fall. 

Semiconductor companies have committed over 40 new projects including nearly $200 billion in private investments to increase domestic production, Reuters reports.

Democratic lawmakers have noted that the most significant U.S. semiconductor companies have poured hundreds of billions of dollars into stock buybacks, with Intel Corp  INTC spending more than $100 billion on buybacks since 2005. Intel also pays a dividend.

The Department will determine whether applicants commit to future investments in the U.S. semiconductor industry and support R&D programs.

The companies winning awards need to restrict the expansion of semiconductor manufacturing capacity in foreign countries of concern, like China, for ten years after winning funding. 

Price Action: INTC shares traded higher by 0.28% at $24.97 on the last check Tuesday.