WASHINGTON — U.S. Commerce Secretary Gina Raimondo said corporations that voluntarily comply with forgo stock buybacks for five years will get preferential treatment when the agency doles out $52 billion authorized under the CHIPS and Science Act.
Raimondo said stock buybacks is one factor being considered as a part of a $39 billion manufacturing subsidy program. The agency, which released its criteria last week, can be weighing recruitment and training strategies in addition to childcare advantages for workers, amongst other issues. The law also creates a 25% investment tax credit for constructing chip plants, estimated to be value $24 billion.
The act is designed to spur domestic production of semiconductor chips and reduce U.S. dependency on Asia for the technology, which is utilized in all the pieces from microwave ovens to automobiles. She said this system wasn’t a “blank check.”
“The law says that these corporations usually are not allowed to make use of the taxpayer money to do a buyback or pay a dividend. Beyond that, we’re giving a preference to corporations who voluntarily say they will not do a buyback for five years,” Raimondo told CNBC’s Sara Eisen on Monday. “Why? Because that is about enhancing research and development in America. The cash must be used to expand in America, to out-innovate the remainder of the world. Spend money on R&D and your workforce, not in buybacks.”
This system also gives preference to corporations that use unionized employees or have labor agreements in place, which she said helps make sure the projects might be done on time and on budget.
“We’re not requiring union, we’re not requiring a project labor agreement,” she said. “We’re preferencing it because we all know from history and from undeniable fact that when you might have a project labor agreement, chances are high it should be done on time on budget by the best-skilled workforce in America.”
In February, Raimondo said the U.S. will invest CHIPS Act funding into constructing no less than two large-scale semiconductor fabrication clusters by 2030 to extend the nation’s competitiveness with leading manufacturers like Taiwan.
“Right away we make zero leading-edge semiconductors in the US,” she said. “We would like to be the one country on this planet where we lead in research and development, software design, and do leading-edge manufacturing and packaging on our shores. And we are going to achieve that goal. I even have little question about it.”
The Commerce Department began accepting applications for CHIPS funding at the top of February.
— Reuters contributed to this text.
