Biden administration ties strings to chip incentives

WASHINGTON — Semiconductor manufacturers seeking a slice of nearly $40 billion in new federal subsidies will need to ensure affordable child care for their workers, limit stock buybacks and share certain excess profits with the government, the Biden administration announced Tuesday.

The new requirements represent an aggressive attempt by the federal government to bend the behavior of corporate America to accomplish its economic and national security objectives.

As the Biden administration makes the nation’s first big foray into industrial policy in decades, officials are also using the opportunity to advance policies championed by liberals that seek to empower workers.

While the moves would advance some of the left-behind portions of the president’s agenda, they could also set a fraught precedent for attaching policy strings to federal funding.

Last year, a bipartisan group of lawmakers passed the CHIPS Act, which devoted $52 billion to expanding U.S. semiconductor manufacturing and research, in hopes of making the nation less reliant on foreign suppliers for crucial chips that power computers, household appliances, cars and more.

The prospect of accessing those funds has enticed domestic and foreign-owned chipmakers to announce plans for or begin construction on new projects in Arizona, Texas, Ohio, New

York and other states.

On Tuesday, the Commerce Department released its application for manufacturers seeking funds under the law. It included a variety of requirements that go far beyond encouraging semiconductor production.

For example, the department is telling companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for workers who build or operate a plant.

Companies applying for awards will be required to submit detailed financial projections, with the federal government entitled to share in any “upside” profits. The Commerce Department depicted that requirement as a way to encourage companies to make their projections as accurate as possible, and not exaggerate any losses to try to secure more funding.

Preference will also be given to applicants that promise to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price. The law already prohibits companies from directly using federal money to finance stock buybacks or pay dividends.

Gina Raimondo, the Commerce secretary, said in an interview that the financial rules would encourage companies to ask only for funding they really need and prevent them from diverting taxpayer dollars to pad the pockets of their shareholders. Other provisions of the program will encourage companies, universities and other parties to offer more training for American workers, in advanced sciences but also in fields such as welding.