Companies that forgo stock buybacks for 5 years to get preferential treatment under CHIPS program
Biden administration Secretary of Commerce Gina Raimondo says the incentives are to coerce companies into investing in R&D, not buybacks.
With the CHIPS Act going into play in the United States, the federal government is supplying bountiful funding to tech companies who will use it to expand technology infrastructure and advancement in North America. It’s also going out of its way to ensure that money is being used specifically for the CHIPS Act’s purpose and not things like stock buybacks, as shared by US Secretary of Commerce Gina Raimondo. In fact, companies that voluntarily forgo stock buyback for five years will receive preferential treatment under the CHIPS Act.
Secretary Raimondo shared more details on how the US government is giving preferential treatment to companies that put a five-year ban on stock buybacks this week, as reported by CNBC.
“The law says that these companies are not allowed to use the taxpayer money to do a buyback or pay a dividend. Beyond that, we’re giving a preference to companies who voluntarily say they won’t do a buyback for five years,” Raimondo said.
The ultimate goal of this preference is to push companies to invest in research and development, as well as building new manufacturing facilities, rather than buybacks or dividends.
Source: White House
By incentivizing use of capital for progression of technology and manufacturing, Raimondo said the administration’s goal is to make the United States the foremost technology power in the world.
“Right now we make zero leading-edge semiconductors in the United States,” Raimondo continued. “We want to be the only country in the world where we lead in research and development, software design, and do leading-edge manufacturing and packaging on our shores. And we will achieve that goal. I have no doubt about it.”
The CHIPS Act has been a major move by both Congress and the Biden administration to boost technological advancement in North America, and companies such as Micron and Intel have aggressively moved to get in on it, both committing to new semiconductor factories in the US over the next few years. Furthermore, Intel has not engaged in stock buyback since Q1 2021, which may partially signal the company's intention to stay on board with the rules for special treatment as Raimondo has laid them out. With the government working to keep companies that take part in CHIPS funding honest, hopefully it will lead to new breakthroughs and progress as the world works to alleviate semiconductor shortages.
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