US attaches childcare strings to $52-billion subsidy for chip makers

The Biden administration on Tuesday said it will require companies winning funds from its $52 billion US semiconductor manufacturing and research program to share excess profits and explain how they plan to provide affordable childcare.

The condition marks an unusual use of the federal government’s powers. Officials said the rule was intended to address a worker shortage.

The Commerce Department on Tuesday is releasing its plans to begin accepting applications in late June for a $39 billion manufacturing subsidy program. The law also creates a 25 per cent investment tax credit for building chip plants estimated to be worth $24 billion.

Recipients who receive more than $150 million in direct funding “will be required to share with the US government a portion of any cash flows or returns that exceed the applicant’s projections by an agreed-upon threshold,” the department said.

Companies winning funding are also prohibited from using chips funds for dividends or stock buybacks, and must provide details of any plans to buy back their own shares over five years.

The department will consider an “applicant’s commitments to refrain from stock buybacks in the application review process” in a five-step application.

Commerce Secretary Gina Raimondo said companies must submit a workforce plan that includes an outline of workforce needs. 

Applicants seeking more than $150 million in direct funding must submit “a plan for how they will provide affordable and accessible childcare for their workers.” The government requires that firms awarded contracts adhere to certain standards above and beyond the rules facing the private sector. 

Most direct funding awards are expected to range between 5% and 15% of project capital expenditures. Commerce said it generally expects the total amount of an award including loan or loan guarantee, will not exceed 35% of project capital expenditures.

Raimondo noted companies winning awards will be required to enter into agreements restricting their ability to expand semiconductor manufacturing capacity in foreign countries of concern like China for 10 years after winning funding. They cannot engage in any joint research or technology licensing efforts with a foreign entity of concern that involves sensitive technologies.

"We're going to be releasing very detailed regulations in the next few weeks that give companies a clearer sense of what the red lines are," Raimondo said on Monday ahead of the announcement.