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US says it will limit size of semiconductor chip subsidies

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Semiconductor chips are seen on a computer circuit board in this illustrative photo taken February 25, 2022. REUTERS/Florence Lo/Illustration

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WASHINGTON, July 29 (Reuters) – The U.S. Commerce Department said on Friday evening it would limit the amount of government subsidies to semiconductor manufacturing and would not let companies use the funding to “increase their bottom line.”

On Thursday, the U.S. House of Representatives gave final approval to legislation providing $52 billion in public funding to boost semiconductor manufacturing and research. President Joe Biden is expected to sign the legislation early next week.

On Friday, the Commerce Department said chip company rewards would be “no greater than necessary to ensure the project takes place here in the United States” and added that it would discourage “the race to the bottom of competitions.” subsidies between states and localities”.

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Congressional Progressive Caucus Chair Pramila Jayapal said the group backed the legislation after lengthy negotiations with Commerce Secretary Gina Raimondo after the group raised concerns that chip companies would use funds to buy out shares or pay dividends.

A caucus spokeswoman said Friday that “Progressives were able to vote for the bill yesterday in the belief that the department would ensure that the funding could not be used for corporate self-enrichment.”

Commerce said applicants must provide detailed financial information and projections for proposed projects and capital investment plans: “The department will vet them with a fine-tooth comb and ensure that companies do not fill out their templates for asking for excessive inducements.”

A Commerce Department spokesperson declined to comment beyond the web posting.

The department pledged to “give preference in awards to companies that are committed to making future investments that develop the domestic semiconductor industry…and not to engage in stock buybacks.” .

The legislation does not prohibit share buybacks by companies receiving public funds, but prohibits the use of grant funds for buyouts.

Companies obtaining financing will be prohibited for 10 years “from engaging in material transactions in China or other countries of concern involving advanced semiconductor manufacturing capacity or material expansions of semiconductor manufacturing capacity. legacy semiconductors designed for export to the United States and other countries”.

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Reporting by David Shepardson Editing by Chris Reese

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