On Friday, the U.S. Commerce Department unveiled the final rules aimed at preventing semiconductor manufacturing subsidies from being used by countries, notably China and Russia, viewed as national security concerns to the United States. These regulations represent the last obstacle before the Biden administration can disburse $39 billion in subsidies for domestic semiconductor production.
The groundbreaking “Chips and Science” law earmarks $52.7 billion to boost U.S. semiconductor production, research, and workforce development, a crucial step to bolster the nation’s technological resilience and competitiveness on a global scale.
The proposed regulations, initially introduced in March, establish “guardrails” by restricting recipients of U.S. funding from investing in expanding semiconductor manufacturing in foreign countries of concern such as China and Russia. It also limits recipients of incentive funds from engaging in joint research or technology licensing endeavors with entities from these flagged nations.
In a bid to curb Beijing’s technological and military advancements, the Commerce Department had previously imposed new export controls in October 2022 to restrict China’s access to specific semiconductor chips manufactured with U.S. equipment.
Secretary of Commerce Gina Raimondo said: “CHIPS for America is fundamentally a national security initiative and these guardrails will help ensure companies receiving U.S. Government funds do not undermine our national security as we continue to coordinate with our allies and partners to strengthen global supply chains and enhance our collective security.”
Gina Raimondo emphasized the necessity of ensuring no funding aids China’s advancement, stating, “We have to be absolutely vigilant that not a penny of this helps China to get ahead of us.” The regulation grants the Commerce Department the authority to reclaim federal awards if recipients violate the imposed restrictions.
The final rules unequivocally prohibit funding recipients from significantly expanding semiconductor manufacturing capacity in countries of concern for a period of 10 years. It also places restrictions on joint research or technology licensing efforts with foreign entities, except for adherence to international standards, patent licensing, and utilizing foundry and packaging services.
Moreover, the rules categorize certain semiconductors as critical to national security, imposing tighter restrictions. These include quantum computing current-generation and mature-node chips, chips for radiation-intensive environments, and those essential for specialized military capabilities.
