Biden administration moves to stop China and Russia from using US chips funding
- The Commerce Department’s proposed guidelines say firms can’t use the funds for projects outside the US or to build facilities in ‘foreign entities of concern’
- There are also plans to restrict joint research or tech licensing for certain types of semiconductors deemed ‘critical to national security’
The US Commerce Department released proposed guidelines on Tuesday to prevent China, Russia, Iran and North Korea from benefiting from US$52 billion in federal funding for semiconductor production.
Companies receiving a portion of the funding will not be allowed to use the funds for projects outside the US. Recipients will also be barred from building or significantly expanding semiconductor manufacturing facilities in the “foreign entities of concern” for the next 10 years, even with their own capital.
The Commerce Department also plans to designate certain types of chips, including those used for quantum computing, in “radiation-intensive environments” and for other military use, as “critical to national security”.
Funded companies will be restricted from conducting joint research or licensing technology from the foreign entities of concern.
If a company violates the rules, the federal government can take back all CHIPS and Science Act funding doled out to the company.
“These guardrails will help ensure we stay ahead of adversaries for decades to come,” Commerce Secretary Gina Raimondo said in a statement. The CHIPS and Science Act “is fundamentally a national security initiative and these guardrails will help ensure malign actors do not have access to the cutting-edge technology that can be used against America and our allies”.
The CHIPS and Science Act passed last year approved US$39 billion in direct grants for manufacturing semiconductors, the tiny components that are crucial for computers and electronics, modern appliances and vehicles.
It also approved a 25 per cent tax credit for companies that build domestic chip plants, which is expected to be worth at least US$24 billion.
The US Treasury Department released proposed rules on Tuesday for the 25 per cent tax credit. Companies that began construction on new semiconductor facilities after the CHIPS Act was enacted on August 9 last year and placed them in service after December 31 are eligible. Treasury also noted that foreign entities of concern cannot claim the tax credit.
‘China won’t just swallow this’: Beijing envoy warns Dutch over chip curbs
The coronavirus pandemic kicked off a global shortage of semiconductors that dramatically disrupted the global car industry, forcing temporary plant shutdowns as carmakers failed to secure the chips needed to finish vehicles.
It slowed the supply and pushed up the price of vehicles, becoming one of the drivers of inflation in 2022.
The proposed guidance released on Tuesday also aligns with export controls the Commerce Department announced in October that aims to prevent China from buying high-end chips.
The agency will begin accepting applications for leading-edge semiconductors later this month, with applications for all chip types opening in late June.
