Joe Biden sets bizarre conditions for US chip subsidies, confuses foreign chipmakers and key players

The Biden administration has revealed some of the conditions that the US will be imposing for granting $39 billion in subsidies under the CHIPS and Science Act, to reform US chip manufacturing on Tuesday. The tech industry, however, has been taken aback by most of these conditions, as sources say some unanticipated clauses make the funds less appealing. Although no chip industry sources said companies would abandon their expansion plans to build in the US, they have made their disdain about the US Department of Commerce’s stringent rules for receiving funding, very clear to several journalists and media outlets. Their complaints range from requiring companies to share excess profits with the government to providing affordable child care for construction workers, Sharing profit Profit-sharing is one of the most controversial issues. According to industry sources, the move was unexpected, and it is uncertain how it will be applied to businesses, each of which will have to make separate agreements with the US government. If this is a prelude to more things that government officials will be looking for during the bargaining stage, “there is some critique that it could make things more difficult to do,” one chip industry source said, asking for anonymity due to the delicacy of the issue. Even some of the widely anticipated measures, such as providing preference to candidates who promise to halt share buy-backs for five years after receiving a grant, could be difficult for some companies, according to industry sources. Share buybacks have helped keep investors pleased during the chip industry’s turbulent market circumstances, which have shifted from scarcity to excess in two years. Another chip executive told South China Morning Post that the conditions set by the US administration is “going to create heartburn for businesses.” This executive suggested that it is “unknown what the market is going to do" because the award “would restrict their freedom.” Problem for manufacturers and their investors Secretary of Commerce Gina Raimondo announced the rules on Tuesday, saying they were designed to guarantee that the money was spent wisely and to help workers. “Throughout our work, we are dedicated to safeguarding public funds, bolstering America’s workforce, and providing a framework for America’s companies to do what they do best: develop, grow, and compete,” she stated. The buy-back and profit-sharing clauses may be difficult to sell to an investor base outside of the United States for firms such as Taiwan Semiconductor Manufacturing Co (TSMC), which has set up on a large factory in Arizona but has not said whether it will apply for US financing. Demands are challenging, but not off-putting The extra requirements to provide comparable benefits to construction employees constructing new plants are “a bit of a distraction, but it’s all manageable” for chip firms that already intended to give child care to their factory workers. A more serious problem is that constructing new semiconductor factories in the United States, where costs are already higher than in industry hubs like Taiwan and Singapore, will almost certainly become more costly. Although no one anticipated a “free lunch,” the unexpected provisions will drive businesses to recalculate their investments in US facilities. Nonetheless, the semiconductor makers will not abandon ship." Read all the  Latest News ,  Trending News ,  Cricket News ,  Bollywood News , India News  and  Entertainment News  here. Follow us on  Facebook,  Twitter and  Instagram.