According to a new document released by the U.S. Commerce Department, any chip company that is claiming subsidies will have to hand over any excess profits. The U.S. government is running a CHIPS semiconductor subsidy that sets aside $52 billion in funds to encourage companies to set up chip manufacturing in the United States.
While the subsidy is designed to encourage chip companies to set up shop in the U.S., it now seems they will have to pay back the money if their profits soar. This seems like a “read the small print first” moment, with the Commerce Department discussing the rules of the subsidy:
Explaining the rules about having to pay forward excess profits, a newly issued document says:
“Recipients receiving more than $150 million in CHIPS Direct Funding will be required to share with the U.S. government a portion of any cash flows or returns that exceed the applicant’s projections (above an agreed-upon threshold specified in the award).
The Department expects that upside sharing will only be material in instances where the project significantly exceeds its projected cash flows or returns, and will not exceed 75% of the recipient’s direct funding award. Because successful projects will differ considerably in their key attributes, upside sharing arrangements may vary by project, and, in exceptional circumstances, may be waived.”
Political Divide
As is usually the case in the U.S. these days, the Democratic and Republican parties disagree on the profit-sharing rule. For the Democrats, they say it is fair that companies should pay back money if they are doing very well.
However, the Republicans contest that the idea of the subsidy is to boost the U.S. economy and the Commerce Department does not have the authority to put in profit-taking provisions.
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