The U.S. Commerce Department on Friday issued final rules preventing China and other countries deemed to pose a U.S. national security concern from using semiconductor production subsidies. The rule is the last hurdle before the Biden administration begins issuing $39 billion in subsidies for semiconductor production. The landmark Chips and Science Act provides $52.7 billion in funding for U.S. semiconductor production, research and workforce development.
The regulations, first proposed in March, set up "cordons" that would restrict recipients of U.S. funds from investing in expanding semiconductor production in high-profile foreign countries, such as China and Russia, and restrict recipients of incentive funds from conducting joint research or technology licensing work with high-profile foreign entities.
In October 2022, the U.S. Department of Commerce issued new export control measures to prohibit China from using U.S. equipment to produce certain semiconductor chips in order to slow down China's technological and military progress.
U.S. Commerce Secretary Gina Raimondo told Congress on Tuesday: "We must be absolutely vigilant and not let a penny help China get ahead of us."
The Department of Commerce can claw back federal grants if recipients of funds violate restrictions. Raimondo told Congress she was working as quickly as possible to get the funding approved. "I feel the pressure," Raimondo said. "We're behind, but it's more important that we get it right. If it takes us another month or a few weeks to get it right, I'm going to defend that because it's necessary."
The provision prohibits grantees from significantly expanding the semiconductor production capacity of the relevant foreign country for 10 years. The regulations also restrict funding recipients from conducting certain joint research or technology licensing activities with relevant foreign entities, but allow the development of international standards, patent licensing, and the use of foundry and packaging services.
The final rule prohibits substantial expansion of semiconductor manufacturing capabilities at cutting-edge and advanced facilities in foreign countries for 10 years. The final rule also clarifies that semiconductor manufacturing includes wafer production. It also ties the expansion of semiconductor manufacturing capacity to the addition of clean rooms or other physical space, defining substantial expansion as increasing production capacity by more than 5%. The rule prohibits recipient countries from adding new cleanroom space or production lines that would expand a facility's capacity by more than 10%.
The rule also classifies some semiconductors as critical to national security, triggering tighter restrictions, including current-generation and mature-node chips for quantum computing in radiation-intensive environments, as well as semiconductors used in other specialized military capabilities.
Related articles: