REPORT: Maximizing the Benefits of the CHIPS Program

The CHIPS for America program is a key pillar of President Biden’s economic agenda, along with the historic and complementary programs the administration is implementing through the Inflation Reduction Act and the Bipartisan Infrastructure Investment and Jobs Act to strengthen public infrastructure and accelerate the transition to a clean energy economy.

As the administration has stated, the goals of this economic plan are to “invest in America, stimulate private sector investment, create good-paying jobs, make more in the United States, and revitalize communities left behind.”

The likelihood of achieving these goals will be far greater if corporations receiving public investment dollars shift away from the all-too-common focus on short-term payouts for top executives and wealthy shareholders and instead focus on building strong workforces and creating long-term value.

The administration has taken many important steps to use the power of the public purse to push corporations in this positive direction. For instance, President Biden lifted the wage floor for certain federal contract workers to $15 per hour. And he has ordered construction firms involved in large public infrastructure projects to negotiate collective agreements with their workers.

With regard to the CHIPS program, the administration took the important step of requiring corporations receiving more than $150 million in subsidies to submit plans to provide affordable, high-quality child care services for their manufacturing and construction workers. If effectively implemented, this will help reduce barriers to semiconductor jobs for people who are underrepresented in the sector, including women. Century Foundation experts have been monitoring companies in line to receive CHIPS grants and are seeing some hopeful signs that firms are engaging with communities to develop good plans for their employees without contributing to rising costs for other households.

Strong stock buyback restrictions on corporations receiving federal subsidies and contracts would reinforce the administration’s economic agenda, since every dollar spent on buybacks is a dollar not spent on employee child care subsidies, worker wages and training, or innovation for long-term competitiveness.

The administration’s decision to provide preferential treatment to CHIPS grantees that agree to forgo buybacks was a positive step. However, as Senator Warren, Representative Jayapal, and other members of Congress pointed out in a recent letter to Commerce Secretary Raimondo, the agency’s guidance for grant applicants continues to “leave the door open for semiconductor companies to take millions or even billions in CHIPS grants, move some money around, and then engage in more stock buybacks.”

To maximize the benefits of this program, the Department of Commerce should take advantage of its statutory authority to fully ban CHIPS grant recipients from engaging in stock buybacks as a condition of their awards. Agreements should also include strong accountability measures if grant recipients engage in stock buybacks in violation of the ban.

As semiconductor corporations have been competing for this funding in recent months, they appear to have been holding back on buyback activity – likely hoping to avoid drawing greater scrutiny of this wasteful practice. But if contracts do not include strong teeth to reinforce the administration’s position, the buyback floodgates could open once again.