Semiconductors: Subsidies With Pitfalls

by | 1. Mar 2023 - 11:08 | Politics

U.S. Department clarifies rules for government support of chip industry.

Under the CHIPS and Science Act, the U.S. government is providing $50 billion to revitalize the domestic semiconductor industry. The Commerce Department opened the first round of applications Tuesday, outlining the conditions that come with the federal financial assistance. For example, the funds will be disbursed in tranches tied to the achievement of project milestones. If these are missed, the grants can be reclaimed in full by the state. Companies must provide regular information on progress.

Companies must also undertake to refrain from expanding semiconductor production capacities in what the government considers “countries of concern” for the first ten years after receiving the money. This likely means China in particular, writes Bloomberg (paywall), as the U.S. government wants to prevent the Asian country from gaining access to the latest generation of chips. But the rules go much further, requiring both the workforce and construction workers building the new equipment to have access to childcare. Applicants are also prohibited from using the funds to pay dividends or buy back shares. According to Reuters, the requirements go well beyond the industry’s expectations and could cause “heartburn” for some companies, an industry official told the news agency.

Photo: iStock/photoman

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