Biden conditions for US chip funding ‘pretty odd’ for foreign companies, industry insiders say
- The Biden administration has announced rules for firms receiving chip subsidies, such as requirements to share excess profits with the government
- The profit-sharing provisions could prove a tough sell to investors base outside the United States, such as Taiwan Semiconductor Manufacturing Co
As the Biden administration on Tuesday disclosed conditions for awarding US$39 billion in subsidies to revamp US semiconductor manufacturing, tech industry sources said some unexpected provisions make the funds less attractive.
Although no chip industry sources said companies would scrap expansion plans to build in the US, they grumbled about the US Department of Commerce’s broad range of rules to receive funding, from requirements to share excess profits with the government to providing affordable child care for construction workers who build the plants.
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The profit-sharing issue is among the most contentious. Industry sources say that the measure was a surprise and that it is unclear how it would be applied to companies, each of which will have to negotiate separate agreements with the US government.
If that is a precursor to more things that government officials would be looking for in a negotiation stage, "there’s some criticism that it could make it more challenging to do things", one semiconductor industry source said, requesting anonymity because of the sensitivity of the matter.
Industry insiders said even some of the provisions that were widely expected – such as giving priority to applicants who agree to stop share buy-backs for five years after getting a grant – could be tough for some firms. Share repurchases have helped keep investors happy during tumultuous market conditions in the chip industry, which have swung from shortage to glut in two years.
A second chip industry executive, requesting anonymity to discuss sensitive matters, said this was "going to cause heartburn for companies”. This executive indicated that it is "unknown what the market is going to do" because the grant "would limit their flexibility".
