Democratic lawmakers, including Senators Elizabeth Warren and Bernie Sanders, urged the US Commerce Department to impose tougher rules to prevent semiconductor manufacturers from using new subsidies to enable stock buybacks.
(Bloomberg) — Democratic lawmakers, including Senators Elizabeth Warren and Bernie Sanders, urged the US Commerce Department to impose tougher rules to prevent semiconductor manufacturers from using new subsidies to enable stock buybacks.
The members of Congress want companies that accept money authorized by President Joe Biden’s CHIPS and Science Act to be restricted from engaging in stock buybacks for at least 10 years and to be barred from using government funding to directly or indirectly support buybacks, among other restrictions.
The law already bars companies that receive subsidies from using them for buybacks or shareholder dividends, but the lawmakers said more specific controls are warranted.
“These restrictions reflect concerns that the $52 billion Congress appropriated for strengthening U.S. competitiveness and bolstering our domestic semiconductor manufacturing, research, and design capacity could instead, without appropriate guardrails, be used to enrich corporate executives and shareholders,” the eight lawmakers say in a letter dated Feb. 10 to the Commerce Department’s CHIPS program office.
Senators Tammy Baldwin and Ed Markey and Representatives Pramila Jayapal, Jamaal Bowman, Bill Foster and Sean Casten are the other signers.
The Commerce Department did not comment on the letter’s specific demands, but pointed to past promises to ensure subsidies are not used for buybacks or dividends.
The five largest US semiconductor companies — Intel Corp., International Business Machines Corp., Qualcomm Inc., Texas Instruments Inc. and Broadcom Corp. — spent $250 billion on buybacks between 2011 and 2020, according to the letter. Some of the lawmakers wrote a similar letter last October.
Democrats sent the letter before the Commerce Department begins to seek applications for tens of billions of dollars in subsidies for companies to build new manufacturing facilities in the US or expand capacity, which is expected this month.
The lawmakers want companies that apply to check a box on a form promising not to conduct buybacks for a specific period of time. The letter also called for disclosure requirements on buyback plans, audits to ensure firms that engage in buybacks are not using subsidies to do so and limits on shares firms are allowed to repurchase.
The CHIPS and Science Act, which Biden signed into law last August, is one of his signature domestic achievements. The president has said his administration will focus this year on implementing laws passed in his first two years in office to ensure their benefits reach the public.
(Updates with Commerce Department’s response in sixth paragraph)
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