WASHINGTON — U.S. Commerce Secretary Gina Raimondo said companies that voluntarily agree to forgo stock buybacks for five years will get preferential treatment when the agency doles out $52 billion authorized under the CHIPS and Science Act.
Raimondo said stock buybacks is one factor being taken into consideration as part of a $39 billion manufacturing subsidy program. The agency, which released its criteria last week, is also weighing recruitment and training strategies as well as childcare benefits for employees, among other issues. The law also creates a 25% investment tax credit for building chip plants, estimated to be worth $24 billion.
The act is designed to spur domestic production of semiconductor chips and reduce U.S. dependency on Asia for the technology, which is used in everything from microwave ovens to automobiles. She said the program wasn't a "blank check."
"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 told CNBC's Sara Eisen on Monday. "Why? Because this is about enhancing research and development in America. The money should be used to expand in America, to out-innovate the rest of the world. Invest in R&D and your workforce, not in buybacks."
The program also gives preference to companies that use unionized workers or have labor agreements in place, which she said helps ensure the projects will be done on time and on budget.
"We're not requiring union, we're not requiring a project labor agreement," she said. "We are preferencing it because we know from history and from fact that when you have a project labor agreement, chances are it will be done on time on budget by the best-skilled workforce in America."
In February, Raimondo said the U.S. will invest CHIPS Act funding into constructing at least two large-scale semiconductor fabrication clusters by 2030 to increase the nation's competitiveness with leading manufacturers like Taiwan.
"Right now we make zero leading-edge semiconductors in the United States," she said. "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 Commerce Department began accepting applications for CHIPS funding at the end of February.
— Reuters contributed to this article.