US CHIPS Act Funds Are Not For 'Stock Buybacks' (theregister.com) 62
An anonymous reader quotes a report from The Register: 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 $52 billion of which is earmarked for boosting US semiconductor production. Its passing was greeted by companies such as Intel and Micron, the latter of which promised to ramp up stateside memory production over the next few years in exchange for some of that cash.
However, the Commerce Department has given chipmakers notice that it will not be allowing a free-for-all, and will not let them use government funding for "stock buybacks or to pad their bottom line," it said in a published statement. Instead, subsidies awarded will be "no larger than is necessary to ensure a project happens here in the United States," the Commerce Department said, adding that it wanted to avoid a situation where states and municipalities became embroiled in a subsidy competition in the race to attract chipmakers to build there. The Department also warned that it will not hesitate to clawback funds or pursue other remedies from semiconductor companies that are found to have misused taxpayer dollars. Funding will come with conditions attached: chipmakers that receive a CHIPS subsidy will be prohibited from engaging in "significant transactions in China or other countries of concern" involving any leading-edge semiconductor manufacturing capacity for a period of ten years.
However, the Commerce Department has given chipmakers notice that it will not be allowing a free-for-all, and will not let them use government funding for "stock buybacks or to pad their bottom line," it said in a published statement. Instead, subsidies awarded will be "no larger than is necessary to ensure a project happens here in the United States," the Commerce Department said, adding that it wanted to avoid a situation where states and municipalities became embroiled in a subsidy competition in the race to attract chipmakers to build there. The Department also warned that it will not hesitate to clawback funds or pursue other remedies from semiconductor companies that are found to have misused taxpayer dollars. Funding will come with conditions attached: chipmakers that receive a CHIPS subsidy will be prohibited from engaging in "significant transactions in China or other countries of concern" involving any leading-edge semiconductor manufacturing capacity for a period of ten years.
optanic (Score:2)
i, for one, would accept a gratis selection of intel's unsold Optane products [anandtech.com] as a thank you to the US Taxpayer from Gelsinger&Co
No big deal (Score:4, Insightful)
What will happen is the taxpayer money these companies get will allow them to free up other money to be used for stock buybacks and executive compensation. It's the same thing Israel does. "Oh yes, THIS money won't be used for the creation of illegal settlements on Palestinian land." *wink* *wink*
What should really happen is these companies should be required to give stock or other ownership rights to the U.S. government (i.e. the U.S. taxpayer) since the taxpayers are footing the bill (again).
Re:No big deal (Score:4, Insightful)
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You (or somebody here) has suggested this before, which is for the government to buy stock in the company, rather than just giving them money. IMHO this seems like a really good idea, and would appeal to both D and R. What impediments are there to getting this done?
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What impediments are there to getting this done?
Currently, the Federal Reserve would need Congressional approval [yahoo.com] to do so. The Fed is prohibited from buying securities, but not bonds and the like [federalreserve.gov]. Besides, who would want the government to own stock in a public company using taxpayer money? Better to just give the company taxpayer money and be done with it.
What is funny is how some people think the Fed being allowed to buy company stock would be socialism [ccn.com], while at the same time having no problem with the g
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That's because handing taxpayer money to companies isn't socialism. Although there have been a couple of regimes that did that, and *called* themselves "Socialist" this, that, or the others. But they weren't.
Re:No big deal (Score:5, Insightful)
Whether or not something is socialist means nothing to the people who scream "We can't do that, that's socialism!"
Tax cuts, giving money directly to rich people, anything that makes rich people richer = good
Anything that improves life for people that aren't rich = Socialism
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That's because handing taxpayer money to companies isn't socialism.
The government handing out money isn't socialism.
The government buying stock IS socialism. Government ownership of capital (the means of production) is exactly what socialism is.
Whether that is a good or bad thing is debatable, but it is what it is.
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No, that's not necessarly socialism. Socialism is about the workers owning the means of the production, not necessarily the state. Yes, some communist states did nationalize many industries, but also some fascist governments did as well (ignore the idiots who claim those are the same thing).
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Remember, in today's political dictionary, anything that they disapprove of is called "socialism".
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I'd structure these grants more like debtor-in-possession loans. Give them a terrifically favorable interest rate
Then the semiconductor companies reject the deal, build their new fabs in Taiwan, and the government achieves none of its objectives.
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Because if this investment works out, you can sell the stock later. Whereas if you give a gift then that taxpayer money is gone and you just cross your fingers that it will be effective.
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What impediments are there to getting this done?
* It doesn't necessarily give any money to the company ...
* It might just makes stockholders rich
* The company might be about to go bust
*
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What???
Government owning corporations, that's COMMUNISM!!!!
Government handing money to corporations and getting jack shit in return is fine, though, go right ahead...
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What should really happen is these companies should be required to give stock or other ownership rights to the U.S. government (i.e. the U.S. taxpayer) since the taxpayers are footing the bill (again).
Sort of as if the government just bought stock?
If you wanted, you could just have the company issue new shares so you're actually giving companies cash, not previous investors.
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What will happen is the taxpayer money these companies get will allow them to free up other money to be used for stock buybacks and executive compensation.
I wonder if anybody at the government has thought of this. Maybe you should contact them to let them know, they could add a "no stock buyback or executive compensations during the time this money is being used" clause to the contract.
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Yeah, either they should be asked to give some stocks to the government or they can't do share buybacks/give more then Y dividends (maybe calculated as at most more then the average of the last 5 years, for example) for X number of years, regardless how much profit they make.
If Intel and others end up with a bunch of cash which they can't send to the shareholders, it may push them to think of ways to improve the business - building more fabs, doing more R&D, etc.
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Or just say, "our subsidies will be in the form of buying your stock." The companies could not immediately buy back the stock because it would be pointless, so the capital would have to be used for either bonuses or spending how it was intended to be spent. The government having a new share of the company could have enough voice to convince the board to not allow the bonuses. If the investment works out and the government goals of revitalizing the industry succeeds, the government can sell off that stock
Call Gordon Ramsay (Score:2)
There's gonna be some serious book cooking going on. When the government says you can't use their free money for something, you just know there are creative accountants who are thinking "challenge accepted!"
Re:Call Gordon Ramsay (Score:4, Informative)
I've seen this episode before.
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You know what he'll say. It's ghastly, stone-fucking cold and more likely than not rotten to the core.
At least this time he won't be complaining about the assets being frozen.
And Neither Were Repatriated Offshore Profits (Score:2)
U.S. Corporations' Repatriation of Offshore Profits: Evidence from 2018 [federalreserve.gov] - "The potential effect of repatriated funds since the passage of the TCJA on firm financing patterns and investment decisions has garnered considerable investor attention. The analysis detailed here shows that funds repatriated in 2018 have been associated with a sharp increase in share buybacks."
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Additional Notice. (Score:2)
If you do stock buybacks during the time you're using this handout, you will be fined twice the value of the stock buyback.
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And just to answer pre-emptively "But what if I have to buy stock back?"
Then don't use the handout, it's not like anyone forces you to use it.
Seriously, you take my money, you play by my rules. It's time we get a government that follows this ideal.
Let's financialization (Score:2)
Re:Let's financialization (Score:4, Informative)
The objective of the CHIPS act is not innovation or technical progress.
The objective is to increase semiconductor manufacturing in America so we aren't dependent on Taiwan and Korea, both in easy airstrike range from China.
Translation (Score:5, Insightful)
Instead of giving out free money we should have demanded stock (voting shares) in return. We didn't, because voters pick candidates not based on which ones will fight for them but based on which one has the coolest adverts, the best rallies, and says the most outrageous things.
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Instead of giving out free money we should have demanded stock (voting shares) in return.
Or they could just ban stock buy backs again, as was the case until 1982 (and 2006 in the UK).
While they're at it they could fix the tax system so capital gains are taxed at the same rate as dividends, removing the incentive (tax loophole) for using stock buybacks.
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> because voters pick candidates not based on which ones will fight for them but based on which one has the coolest adverts, the best rallies, and says the most outrageous things.
I don't know if you realize this, but Joe Biden is the President.
Special circumstances (Score:2)
grants to religious schools... (Score:5, Insightful)
...for repairs like playground equipment are not supposed to be used for promoting religion. They are to be used for the assigned purpose.
Yet somehow those churches and church schools all end up with more money for promoting religion. They simply play the numbers - I had a budget of X, now I have budget X+20...so my original 20 I was going to spend on playground repairs can now go to promoting religion, since the government is going to pay for the playground.
This is no different. It is trivial to f' with the accounting for CHIPS work that was already on the budget to use this and then funnel that money into the buybacks anyways. These accountants are experts at it just as much as movie studio and record label accountants are pros and proving a film never recouped.
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...for repairs like playground equipment are not supposed to be used for promoting religion.
Is this a common problem?
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Is this a common problem?
Of course not. The federal government has never given private schools money to repair playgrounds.
The claim that they have is fabricated nonsense, despite being modded +5 Insightful.
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When it's a church school, "promoting religion" is sort-of the point.
This is why other countries have a 50% rule: They only pay for half of the new equipment, making it much more difficult for any business to indulge in a spending spree. The US government repeatedly hands-over money to businesses, no strings attached.
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That approach just makes repairs twice as expensive...
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The far, far, more likely scenario goes a bit differently: "I was planning to spend x on playground repairs, but now I have a budge of x+20. Now I can spend x+20 on repairs and get better results!"
See, plans like this are always a compromise. What is the most we can do with the budget that we have? What is most essential and what can be put off until later? Are there alternatives to necessary but expensive repairs? A larger budget than planned means you don't need to compromise as much.
Stock buy backs? (Score:1)
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Have any evidence of that ever happening?
Re:Stock buy backs? (Score:4, Interesting)
It's not like people spend money on lobbyists and donations to assorted PAC slush funds because they are idiots; or like you can necessarily get money allocated for one thing without agreeing to support some senator's home district pet project; but those are a distinct class of failures from just claiming that the feds can't cut a check without unspecified 'corruption and graft' causing most of it to disappear in transit.
You can certainly point to something like the SLS, where it's not clear whether congress even expected to get a launch system out of it vs. just keeping a bunch of contractors busy, or some of the broadband buildout subsidies, which didn't get what they were supposed to, mostly without consequences, as evidence of diversion of funds from their stated purpose; but in those sorts of cases it's not like the money got lost in shipping.
It's entirely possible that less money than we would like will actually end up in semiconductor fabrication in this situation; but that will be because Intel's financial engineers have the upper hand vs. their real engineers; not because sinister bureaucrats will have somehow eaten most of it before it gets to the saintly private sector.
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COVID stimulus payments for one... most of it went to government-funded programs (hospitals, universities, museums etc) that are already swimming in endowments, about 20% of it made it into private businesses and people's hands.
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You've made a specific claim. Only 20% of COVID stimulus money made it to private businesses and ordinary people. Now, prove it. Real data, real sources.
I'm mildly curious as to why you think COVID stimulus going to hospitals is somehow evidence of government corruption, but I'll save that insanity for another day.
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Many hospitals and Universities are private entities, as I said, with massive endowments.
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So no evidence then. I'm not surprised.
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That'd be the clause in the contract that says "no stock buybacks for two years".
(or whatever the conditions are)
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What clause states that? Nothing in the report states anything like that. All it says is that government funds cannot be used for buybacks. Nothing about the funds they already have. All these companies are already flushed with cash. They could fund building fabs themselves, but would rather others foot the bill while raising their stock price through either buybacks or dividends.
It's pretty clear.
The Trump Tax cuts fucked up investment in the US. Instead of forcing companies to reinvest into their co
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What exactly is stopping them from getting these government funds to build out what they wanted to do
They are being paid to do what they do NOT want to do.
Semiconductor manufacturing in America is not cost-effective. If you leave it up to the corporations, they will build their new fabs in Taiwan and Korea. If we want the fabs in America, we need to provide incentives.
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Silicon manufacturing (e.g. ingot production) may not be profitable here, but wafer fabrication most certainly is. The difference here is that American companies have lost out in the tech race, including Intel. It's no longer profitable for those specific companies to dump loads of cash on leading-edge nodes (Intel is still doing this, and failing at it massively). Companies like TI and GF have been chasing lower-margin contracts using older nodes, and Intel is being forced to make the painful decision a
Bullshit (Score:3)
Straight up do not believe this at all. Our government's main function now is to dole out corporate welfare. They're not going to let accountability get in the way of appeasing their real constituents, this is just talk to make taxpayers feel good. A little creative accounting (if that's even needed) and suddenly the money appears from some other stream.
Alternative solution: tax cuts (Score:3)
The problem is that US companies are investing overseas, rather than in the US. So I have an idea: lets give the American companies a huuuge tax cut, so that they will start investing here in the US! Oh wait.... we already did that a few years ago.... and they just used the money to pump up their stock...