Washington also bans beneficiaries of $39bn program from using cash for share buybacks
U.S. Commerce Secretary Gina Raimondo, right, and Secretary of State Antony Blinken participate in a U.S.-European Union Trade and Technology Council ministerial meeting at the University of Maryland in December. © Reuters
WASHINGTON (Financial Times) -- Chipmakers must agree not to expand capacity in China for a decade if they are to receive money from a $39 billion federal fund designed to build a leading-edge U.S. semiconductor industry, according to new Commerce Department rules.
The department on Tuesday called for applications for funds from the CHIPS and Science Act passed by Congress last year, as it launched a landmark industrial policy program designed to counter China.
In announcing the move, Commerce Secretary Gina Raimondo stressed that the department would be implementing safeguards to ensure the program was not abused.
"Recipients will be required to enter into an agreement restricting their ability to expand semiconductor manufacturing capacity in foreign countries of concern for a period of 10 years after taking the money," said Raimondo, who did not mention China by name.
She added that companies that receive funding must also not "knowingly engage in any joint research or technology licensing effort with a foreign entity of concern that involves sensitive technologies or products."
Congress passed the CHIPS Act in an effort to create an industry capable of mass-producing leading-edge semiconductors, which are mostly made in Taiwan at present. In addition to measures to help American companies, the Commerce Department has taken measures to slow China's chipmaking industry, including the imposition of sweeping export control regulations last October that will make it hard for Beijing to obtain advanced chips.
"Our goal is to make sure that the United States ... is the only country in the world where every company capable of producing leading-edge chips will be doing that in the United States at scale," said Raimondo.
A Commerce Department official said companies that receive more than $150 million would have to return some money to the government when they make returns that surpass original projections by an agreed threshold.
The official said the $39 billion could potentially be leveraged to provide another $75 billion in federally supported funding. "Total possible program outlays ... could be well over $100 billion."
Raimondo said companies would have to agree to other restrictions, including a prohibition on using the money for share buybacks or dividend payments.
"I also want to be clear that no CHIPS dollars can be spent on stock buybacks," Raimondo said. "This is about investing in our national security, not enabling these companies to use our money to increase their profits."
Raimondo added that companies applying for more than $150 million would also have to outline in advance how they would provide affordable child care for workers -- a move that reflects concern that the U.S. does not have enough skilled workers to ensure the goal of the CHIPS Act is met.
"This is a math problem. We need more people in the labor force. We right now lack affordable child care, which is the single most significant factor keeping people, especially women, out of the labor force," said Raimondo.
https://asia.nikkei.com/Politics/International-relations/US-China-tensions/U.S.-CHIPS-Act-fund-bars-chipmakers-from-China-expansion-for-10-years
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