U.S. Secretary of Commerce Gina Raimondo testifies during the House Science, Space and Technology Committee hearing titled “Chips on the Table: A one year review of the CHIPS and Science Act,” in the Rayburn Building in Washington, D.C., on Sept. 19, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
WASHINGTON — A group of Democrats are raising concerns as to whether companies that received federal funding for semiconductors used the money to support stock buybacks — and criticizing their own party over how the awards are given.
In a letter to Commerce Secretary Gina Raimondo obtained by CNBC, four lawmakers flagged that BAE Systems commenced a round of buybacks in the same period it will be paid a $35 million award from the CHIPS Act.
The letter, led by Sen. Elizabeth Warren of Massachusetts and signed by Reps. Sean Casten and Bill Foster of Illinois and Pramila Jayapal of Washington also noted that Intel, which has received the largest award to date — $8.5 billion — was approved by its board of directors to repurchase $7.24 billion in stocks.
Intel CEO Pat Gelsinger told Yahoo Finance last year that the company remains “committed to the dividend.”
Raimondo has stated that CHIPS funding is not meant to pad companies’ bottom lines or support stock buybacks.
But lawmakers urged her to go further, and ban stock buybacks for companies that receive CHIPS funds.
In the letter, lawmakers wrote that the department has continued to “leave the door open for these large semiconductor companies to take millions or even billions in CHIPS grants, move some money around, and then engage in more stock buybacks.”
“[I]t is difficult to square the buyback history and stated intentions of the CHIPS awardees with Commerce’s indication that it will favor manufacturers that make real commitments not to engage in buybacks,” lawmakers wrote in their letter.
About $33 billion of funding from the CHIPS Act has been allocated, mostly to major companies. According to a statement from the department, the awards are still preliminary and companies are still undergoing a due diligence review.
This isn’t the first time Warren has sounded the alarm about companies that receive awards engaging in buybacks.
She wrote to BAE Systems earlier this year, and the company responded that every dollar from the grant will go to its Microelectronics Center. It also said decisions on buybacks were independent from any funds released through the CHIPS Act.
BAE Systems, Intel and the Commerce Department did not immediately reply to CNBC’s requests for comment on the letter.
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