July 01, 2024

Casten, Warren, Foster, Jayapal to Commerce: No CHIPS Funding for Stock Buyback Subsidies

Text of Letter (PDF)

Washington, D.C. – U.S. Representative Sean Casten (D-Ill.), Senator Elizabeth Warren (D-Mass.), and Representatives Bill Foster (D-Ill.) and Pramila Jayapal (D-Wash.) wrote to the Secretary of Commerce Gina Raimondo, urging the Department of Commerce (Commerce) to use its full statutory authority to ensure taxpayer dollars from the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act does not directly or indirectly fund stock buybacks and other shareholder distributions. 

The CHIPS Act of 2022 provides funding to shore up the semiconductor industry in the United States, a unique opportunityto advance the United States’ technological and scientific capacity, create thousands of high-skilled jobs, and secure national security interests. The bill also explicitly prohibits companies receiving funding from using CHIPS grants to repurchase their stock or pay dividends to stakeholders, although strong implementation is needed to prevent abuse. 

To date, nearly $30 billion in federal CHIPS grants have been awarded, with the grants going to just eleven semiconductor producers, most with a history of billions in stock buybacks. The first CHIPS grant of $35 million went to BAE Systems (BAE) in June 2023. At the time, BAE was in the midst of a $2 billion stock buyback, with another nearly $2 billion in stock buybacks authorized. Intel, recipient of a $8.5 billion CHIPS award, the largest to date, assured investors last year that the company remained committed to delivering “very healthy” dividends to shareholders, even amid layoffs.  Intel also currently has authorization from its Board of Directors to buy back a further $7.24 billion in stock. 

Earlier this year, Representative Casten and Senator Warren wrote to BAE, inquiring about their stock buyback plans. BAE refused to commit to pausing stock buybacks or to not engage in future ones. BAE CEO Thomas Arsenault also did not answer whether BAE had committed not to use other fungible capital to buy back stock while receiving a taxpayer-funded CHIPS grant. 

Secretary of Commerce Gina Raimondo has provided personal assurances that “CHIPS money is not a subsidy for big companies … for stock buybacks or to pad their bottom line,” but Commerce's enforcement of this ban is critical. Unfortunately, Commerce’s notice of funding opportunity and the taxpayer protections outlined by the National Institute of Standards and Technology (NIST) continue to leave the door open for large semiconductor companies to take millions or even billions in CHIPS grants, move some money around, and then engage in more stock buybacks and shareholder distributions. 

Instead, Commerce has only stated that when awarding grants, preference will be given to companies who commit to not engage in stock buybacks and asked applicants to detail their plans for stock buybacks over five years. These applications and the subsequent preliminary agreements are not public, making it difficult to determine if grant recipients' commitments to Commerce are consistent with their buyback history and future intent to engage in buybacks. 

The lawmakers are also requesting answers about Commerce’s implementation and enforcement of the CHIPS Act by August 1, 2024.

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