The US government will require subsidized chipmakers to share

The US government will require subsidized chipmakers to share excess profits

At the end of June, as announced the day before with the deposit Reuters, US authorities will begin accepting applications from companies applying for government subsidies to build US chip manufacturing facilities. The conditions for grant recipients are becoming increasingly unattractive: they are forbidden from expanding production in China and forced to share “excess profits”.

    Image source: Micron Technology

Image source: Micron Technology

Even the day before it was knownthat US officials will actively exploit the social agenda when distributing funds aimed at stimulating the construction of chip manufacturing companies in the United States. Grant recipients are required to care for children not only for workers in manufacturing but also for professionals working in the construction of businesses. This can be achieved both by paying compensation to employees who send kindergartens, and by building “departmental” preschool facilities in close proximity to enterprises. The move, according to US officials, is intended to boost the development of the US job market as some women are still unable to return to active economic activity after the pandemic.

One of the unexpected requirements for the subsidy recipients was the obligation to repay to the US authorities a portion of the profits in excess of a predetermined amount. If in the future the manufacturer, who built the company to produce chips with the support of the US authorities, earns more than the amounts stipulated in the initial business plan, part of the money will have to be returned to the state budget. However, the total amount cannot exceed 75% of the original subsidy. In such conditions, the profits of grant recipients who claim to have received more than $150 million for the implementation of their projects are monitored.

A similar control threshold has been set for paying dividends and share buybacks. Companies cannot return capital from public funds to investors for five years after receiving the subsidies. In the first five years, the companies must coordinate the relevant plans with the US authorities. Significantly, the latter will also require companies to use metals and construction materials that are made exclusively in the United States.

Government subsidies cover 5 to 15% of a company’s capital expenditure in most cases. Together with borrowed funds to be repaid, their share will not exceed 35% of the total investments. Starting in June, we will be accepting applications from companies planning to organize the production of chips in the United States using different generations of lithography: from mature to advanced. The selection of applications for the construction of research centers will begin in the autumn.

As previously planned, subsidy recipients will lose the right to expand their production in China or other US-hostile countries over the next ten years. They are also prohibited from doing research together or licensing their technologies to companies from friendly countries. US officials promise to provide applicants with detailed rules for awarding subsidies in the coming weeks.

According to information Reuters, the conditions for receiving subsidies imposed by the US authorities caused some dissatisfaction among the applicants, and the requirement to share excess profits became the main source of irritation. Businesses have to agree these break-even points individually with officials, above which part of the subsidies must be returned to the budget. The second most unsatisfied demand is a five-year cap on share buybacks and dividend payments, as this will deter a number of outside investors from the company. This condition looks the strangest for foreign companies like TSMC, although there is still no information on its willingness to use US subsidies to build its facilities in Arizona. Although additional difficulties have not forced any of the main contenders to abandon plans to create a semiconductor manufacturing facility in the United States, Reuters sources explain.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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