Unreasonable Subsidy Procedures by US Department of Commerce
Controversy Over Risk of Business Confidentiality Leakage
In order for South Korean semiconductor companies to receive subsidies under the U.S. CHIPS and Science Act (CSA), they must disclose profitability indicator figures and even submit Excel files that verify the calculation methods.
On the 27th (local time), the U.S. Department of Commerce provided guidelines for applying for semiconductor production facility investment subsidies containing these details. As a result, domestic companies are expected to face controversy as they must disclose items that could be considered business secrets, such as the expected semiconductor yield of specific facilities.
The key point of the requirement from the Department of Commerce this time is that when submitting financial statements such as expected cash flow and profits of production facilities, which were guided through the semiconductor subsidy application procedure on the 28th of last month, companies must submit Excel files containing the calculation formulas.
The Department of Commerce explained, "Financial status is a very important part of the CSA program review," adding, "It is used to evaluate business feasibility, financial structure, economic viability, and risks, and to review the scale, type, and conditions of potential subsidies." This appears to be intended not only for determining the subsidy amount but also for reclaiming part of the funds to the treasury if companies earn higher-than-expected profits.
In particular, according to examples provided by the Department of Commerce, companies must virtually fill out and submit almost all financial figures of semiconductor factories through Excel files. For example, they must input production capacity by wafer type, operating rate, expected wafer yield, sales price in the first year of production, and changes in production volume and sales price in subsequent years.
On the cost side, companies must report materials, consumables, chemicals used in semiconductor production, labor costs required for factory operation, public utility fees, and research and development (R&D) expenses. They must also calculate costs by material such as nitrogen, oxygen, hydrogen, sulfuric acid, and input employment numbers by employee type such as engineers, technicians, and managers.
Additionally, companies are required to disclose subsidies and loans received from local governments or other sources.
The Wall Street Journal (WSJ) reported regarding these guidelines that the so-called "profit cap sharing" is a clause closely watched by the industry, noting that semiconductor industry executives are concerned that a high level of profit sharing could reduce the attractiveness of receiving government subsidies when building new semiconductor facilities in the U.S.
Meanwhile, companies planning to build advanced semiconductor factories can submit applications starting from May 31, and those planning to build other semiconductor factories and back-end process facilities can submit applications from June 26. Samsung Electronics, Taiwan's TSMC, and Intel are expected to apply for semiconductor subsidies.
In addition, the Department of Commerce also released workforce development plan guidelines containing compliance items related to employee hiring, training, and retention plans that companies must submit together.
U.S. Secretary of Commerce Gina Raimondo stated, "Through the CSA, we will provide more opportunities to all Americans, including women, veterans, people of color, people with disabilities, youth, and those from rural areas," adding, "We will remove barriers that prevent them from entering semiconductor jobs."
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