U.S. Commerce Department: Will limit the scale of government subsidies for semiconductor manufacturing

On July 30, the U.S. Department of Commerce said on Friday night that it would limit the scale of government subsidies for semiconductor manufacturing and would not allow companies to use funds to "bottom out."

On Thursday, the U.S. House of Representatives finally approved legislation to provide $52 billion in government funding to boost semiconductor manufacturing and research. President Biden is expected to sign the bill early next week.

The Commerce Department told local chip companies on Friday that subsidies would be "no more than the amount generated to ensure that projects operate within the United States," adding that the department would prevent "competitive subsidies between states and localities."

Pramila Jayapal, chair of the Congressional Progressive Caucus, said the group backed the legislation after lengthy negotiations with Commerce Secretary Gina Raimondo after expressing concerns that chip companies would use the funds to buy back stock or pay dividends.

A caucus spokesman said on Friday that "progressives were able to vote for the bill, trusting that the department will ensure that funds cannot be used for business self-enrichment."

The Commerce Department said applicants must provide detailed financial information and projections for proposed projects and capital investment plans: “The department will carefully review this information and ensure that companies do not populate their models in order to claim excess awards.”

The Commerce Department also pledged to prioritize among subsidies companies that "commit to invest in the development of the domestic semiconductor industry in the future" over companies that engage in share buybacks. In addition, the legislation does not prohibit companies that receive government funding from repurchasing stock, but it prohibits the use of subsidized funds for buybacks.