Biden’s Semiconductor Plan Flexes the Power of the Federal Government

WASHINGTON — Semiconductor manufacturers seeking a slice of nearly $40 billion in new federal subsidies will need to ensure affordable child care for their workers, limit stock buybacks and share certain excess profits with the government, the Biden administration will announce on Tuesday.

The new requirements represent an aggressive attempt by the federal government to bend the behavior of corporate America to accomplish its economic and national security objectives. As the Biden administration makes the nation’s first big foray into industrial policy in decades, officials are also using the opportunity to advance policies championed by liberals that seek to empower workers.

While the moves would advance some of the left-behind portions of the president’s agenda, they could also set a fraught precedent for attaching policy strings to federal funding.

Last year, a bipartisan group of lawmakers passed the CHIPS Act, which devoted $52 billion to expanding U.S. semiconductor manufacturing and research, in hopes of making the nation less reliant on foreign suppliers for critical chips that power computers, household appliances, cars and more. The prospect of accessing those funds has already enticed domestic and foreign-owned chip makers to announce plans for or begin construction on new projects in Arizona, Texas, Ohio, New York and other states.

“We don’t want to spend a dollar more than necessary to make these projects happen,” she said.

The requirements will join a growing list of administration efforts to expand the reach of President Biden’s economic policies beyond their primary intent. For instance, administration officials have attached stringent labor standards and “Buy American” provisions to money from a bipartisan infrastructure law.

Companies that receive chip subsidies to build new plants will be able to use some of the funding to meet the new child care requirement. That could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost for workers, directly subsidizing workers’ care costs or other, similar steps that would ensure workers have access to care for their children.

Other provisions of the program will encourage companies, universities and other parties to offer more training for American workers, in advanced sciences but also in fields like welding. The program will encourage colleges and universities to triple their graduation of new engineers over the next decade, Ms. Raimondo said in a speech last week, while also offering high-paying jobs to tens of thousands of American workers without four-year college degrees.

Ms. Raimondo outlined an ambitious vision for investing in the United States to build “a self-propelling engine of innovation and production.” The goal of the program, she said, was to create at least two manufacturing clusters for the most cutting-edge chips, as well as factories for older chips. The ultimate aim would be to spur a vibrant semiconductor ecosystem in which every leading global chip company would feel the need to have both research and manufacturing in the United States, she said.

In interviews, Ms. Raimondo said the CHIPS requirements would help companies attract women to fill open jobs at a moment when many companies are struggling with a labor shortage.

Chip makers, Ms. Raimondo said, “will not be successful unless you find a way to attract, train, put to work and retain women, and you won’t do that without child care.”

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The rules for chip makers come on top of other requirements written into the law, including a ban on certain new investments in China. Under that restriction, chip manufacturers that take U.S. funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, a prohibition designed to ensure that U.S. taxpayer money does not go toward building operations in China.

But analysts have argued that some of these restrictions may be difficult to uphold, given that money is fungible and can pass from one part of a company to another outside of public sight.

Some Republican and Democratic lawmakers have also questioned the wisdom of giving any taxpayer money to the chip industry, which is generally profitable. Executives have countered that the high cost of operating in the United States — and subsidies offered by foreign governments — make it cheaper for semiconductor companies to manufacture their products offshore.

The next few months will provide the first test of how the Commerce Department balances those concerns. Ms. Raimondo said companies would have to open their books to her team, and that the goal would be to try to “crowd in” private investment, rather than canceling it out.

In Phoenix, where semiconductor manufacturing is booming, child care costs consume about 18 percent of a typical construction or manufacturing worker’s salary. That share is higher than the national average.

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