Chipmakers warned: US CHIPS Act funds are not for 'stock buybacks' The US Commerce Department says it will strictly control use of subsidies under the recently passed CHIPS and Science Act, which promises to unlock billions of dollars in funding for domestic chip manufacturing. The eagerly anticipated spending bill paves the way for $280 billion in funding for science and technology, roughly …
??? Please tell me I've tripped over Poe's law again!
They are absolutely allowed to return value, they just aren't allowed to take federal money and funnel it directly to shareholders. The have to actually use it to make things first, hopefully increasing the value, before enriching the shareholders.
I'm glad the lawmakers have thought of this, even if it took them multiple rounds of "economic investment" where the companies did abuse the subsidies (Stock buy-backs, marking the money as "profit" and disbursing dividends based on it; never using it for pay-roll, debt mitigation, or what it was earmarked for) before the lawmakers thought about making sure it can't be abused.
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Yep, that is the deal, you have got it right. However I feel that context is everything. Here is the relevant pieces to try to better understand the ideas and motivation properly:
However I would like to make two key points:
1. The goal of this handout is to make sure that manufacturing plants are built in the USA and not other countries, typically guaranteeing decades of investment and employment. It also helps keep RnD here.
2. Their opponents are being subsidized for strategic reasons (EU and China). The history of offshoring of US manufacturing is often due to a specific nation state's intentional strategy. It is hard to compete with that.
3. It puts some ties on collaborating with China to retard their semiconductor industry.
Overall it probably helps meet the government's primary duty of keeping their citizens safe and free. Never underestimate the power of a nation state to simply "not sell you something" to affect policy. Secondarily, it is likely to be at most revenue neutral for the USA, or a positive, if it keeps the factories in the USA.
Protectionism is a sign of defeat...
Karl Lagerfeld : 'Sweatpants are a sign of defeat. You lost control of your life so you bought some sweatpants.'
Where are my Intel Sweatpants?
Let's examine your logic..
1) How does building a plant in the US benefit the US? OSHA, IRS, EPA, FTC. Are you planning to export products? Can you name one US Gov subsidized product other than Boeing Aircraft that are exported? Don't tell me strawberries. You lost that market in Japan three years ago to China. Who will buy these Fab chips? Gov is already trying to sanction the largest Chip buyer in the world with this nonsense. See your #3 reason. Building a plant in the US sounds like making work and welfare. Who is going to enforce this? It will take more than five years to build a FAB plant in the USA. Intel has already failed at 10nm so it may never happen. This is arbitrary and capricious. There are no regulations. No accountability.
2) Flatly nonsense. Offshoring is a populist term that has no meaning that makes sense. Qualcomm is in CHINA to get access to the largest Semi market in the world. According to your notion, if Africa enticed them, they would offshore to Africa. WRONG. the only enticement of Capitalism is MARKETS and the Chinese are the biggest markets.
Finally, if you think China and Korea are going to stand still and HAND the US the global semiconductor market, I don't know what to say. And the EU better think this through as well as the US tells European companies where they may and may not sell their products.
THIS WILL ALL FOLD BIGGER THAN THE TEXAS SUPER COLLIDER!
You can suggest anything you like. THOUGH I RESERVE THE RIGHT TO NOT OBLIGE. In argument, the attack of an individual is ad hominem and you lose the argument.
I have read your post several times and did not encounter a single argument that you refuted or even attempted to refute. I find the worship of Government taking the control over future technology as somewhat AMTRAKY... excuse my schwa.
I run a small manufacturing company so I have first hand experience that says yes, having access to domestic supplies of critical components is a massive competitive advantage against similar businesses in other countries. It doesn't matter if your product is for export or domestic consumption so this is a moot point.
This leads into your other point about offshoring - which by the way is the first time I've heard described as a "populist term". There are not too many countries around the world that have a large well educated populace, excellent transport links, reliable electrical/gas/water supply and domestic supply of essential high-tech components. The US happens to be one of these countries so establishing high-end chip fabs there does make sense. Salaries, labor laws, EPA regulations etc. in Taiwan are not massively different from the US and the EPA laws are actually stricter than most US states but Taiwan still manages to be a chip manufacturing powerhouse.
Africa is a nonsense comparison because the infrastructure just doesn't exist to set up a large high tech manufacturing base. If at some point the infrastructure is built I'm sure that offshoring to Africa will start to happen.
As far as the Chinese Market goes this is a grossly misunderstood and over-hyped beast. Western companies are very slowly understanding that there may be a lot of potential Chinese customers but it's very difficult to actually make any money in the mainland China market and even very large businesses are likely to get screwed at some point. I personally know of several American businesses who are pulling out or already pulled out of China and are moving back to the US.
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"I'm glad the lawmakers have thought of this, even if it took them multiple rounds of "economic investment" where the companies did abuse the subsidies (Stock buy-backs, marking the money as "profit" and disbursing dividends based on it; never using it for pay-roll, debt mitigation, or what it was earmarked for) before the lawmakers thought about making sure it can't be abused."
I am glad for your sake you did not read the actual text of the bill in which there was NO MENTION WHATSOEVER of buybacks and other abuses to which you have illuded."
How much money can a company sock away in a feasibility study? All of it? Miss Hotbody and her able assistants will be heading up the feasibility study and spending their weeks at the Company's New Beach Cottage and feasibility Yacht facilities, boning up on the technology under the close supervision of the CEO and several other key executives, military brass, and congressional fact finders.
You are aware that you can sell your share for a higher amount if the company does well and is generating more profits, and that they can pay you a higher dividend if they have more profits, right? This just says that they can't take a chunk of money and call it profit. They can still build something with it, generate a real profit from the use of that thing, and use that profit. They also won't have to pay as much in the construction costs for the thing that eventually generates the profit. Unless your theory is that they will fail to build the facilities they say they will, this should encourage you to hold their stock, all other things equal.
I'm pleased to hear the noises coming out of Washington. Subsidies have, in the past, been avidly abused to prop-up C-level execs' bonuses.
I'm purring with delight that the government is keeping a sharp eye on our tax dollars and attaching some strings to the money being provided.
Politicians believe that money comes in different colours.
"Subsidy money", sales money, profit money, "windfall profits" money, and so on.
CEOs know there is just one colour of money:
Green.
Also known as revenue. Any revenue is good revenue, no matter the source.
Intel understands this.
Washington doesn't.
For some reason, reading this article made me want to say the word "fungible" a couple of times. I'm really not sure why. Perhaps someone could explain to me how it's relevant to "giving large sums of money to a corporation and expecting that they will spend it in a certain way." :D
And who is the ENFORCER? The Sec of Commerce... the former Gov of Rhode Island consistently the 50th worst business state in the Colonies. How is she going to know there was a stock buyback? She wouldn't. Have to grow some snitches.
This little gem I found fantastic in every way...
(B) during the term of the grant, the private entity to which the covered incentive was offered engages in any joint research or technology licensing effort—
(i) with the Government of the People’s Republic of China, the Government of the Russian Federation, the Government of Iran, or the Government of North
Korea; and
(ii) that relates to a sensitive technology or product, as determined by the Secretary.
Toilet Paper could qualify I submit.. Isn't it sentient?
The best part is the Gov hierarchy that decides which technology and which "entity" qualifies for the "Covered incentives" ON BEHALF OF THE TAXPAYER...
All I can say is thank God and the Queen that HOMELAND SECURITY is involved... The world can feel safe again from the ravages of Division of Labour.
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