Chip firms assess Biden's subsidy rules

STORY: The Biden administration on Tuesday had a message for any semiconductor companies that want a piece of the $39 billion in new federal subsidies from the CHIPS Act: the money comes with string attached.

Companies will be required to share excess profits and explain how they plan to provide affordable childcare to employees as part of the deal of accepting government funds.

But Sarah Kreps, a professor at Cornell University's Dept. of Government, says it could cause some apprehension from potential subsidy recipients.

"There's no free lunch. And I think that's the point of the United States government, which is 'if we're giving you billions of dollars, we're going to shape or we'll want to shape how you're using those funds.' But I think what has happened in the meantime, since the legislation was passed and signed into law in August, is that the industry as a whole has really taken a hit. So the macroeconomic conditions that affect this industry, which is that the tech industry has had a slump and the tech industry is what drives the demand for these chips, largely.

So some of these kind of headwinds are starting to confront the industry. And I think where these strings attached dynamics come in is they're now layered on to this sense that, you know, maybe a few billion dollars in incentives will not actually change the calculation and the economic wisdom of building plants in the United States."

The CHIPS Act is vital to U.S. ambitions to keep ahead of China in global markets and reduce reliance on chips made in Taiwan.

James Lewis, senior vice president at the Center for Strategic and International Studies, says at the end of the day, that's all that should matter.

"The ultimate goal here is do we find ourselves less reliant on Taiwan as a source of chip supply? And if we achieve that goal, all this other stuff is is extraneous. So that's the first priority when you look at the administration's priority sheet. That's their first priority. So and childcare in the workforce stuff is priority number five important. But the main prize is reduce dependance on Taiwan."

Semiconductor companies have already announced more than 40 new projects including nearly $200 billion in private investments to increase domestic production -- aimed at helping the U.S. gain pre-eminence in the semiconductor market.