The final rules mandate that funding recipients refrain from substantially expanding semiconductor manufacturing capacity in countries of concern for a duration of 10 years.
In a decisive move, the U.S. Commerce Department has unveiled conclusive regulations aimed at preventing China and other nations flagged as potential national security risks from tapping into semiconductor manufacturing subsidies.
This development marks the last hurdle before the Biden administration can allocate $39 billion in subsidies for semiconductor production, a pivotal step in the implementation of the “Chips and Science” law, which allocates $52.7 billion for U.S. semiconductor production, research, and workforce development.
Proposed initially in March, these regulations establish firm “guardrails” by constraining recipients of U.S. funding from investing in the expansion of semiconductor manufacturing in countries like China and Russia, which are viewed with heightened scrutiny.
Additionally, it places limits on funding recipients’ engagement in collaborative research or technology licensing endeavors with foreign entities that raise national security concerns.
As of October 2022, the Commerce Department had already initiated new export controls to sever China’s access to specific semiconductor chips produced using U.S. equipment, a strategic move to curb Beijing’s technological and military advancements.
Addressing Congress, Commerce Secretary Gina Raimondo emphasized the imperative to ensure that not a single cent of this funding aids China in surpassing U.S. capabilities. The Commerce Department holds the authority to reclaim federal awards in the event of violations of these restrictions.
Raimondo acknowledged the urgency of award approvals, asserting her commitment to expediting the process. She underlined that while time is of the essence, precision in execution takes precedence, even if it requires an additional month or a few more weeks.
The final rules mandate that funding recipients refrain from substantially expanding semiconductor manufacturing capacity in countries of concern for a duration of 10 years.
Likewise, they are prohibited from engaging in specific joint research or technology licensing ventures with foreign entities that raise national security apprehensions. However, exceptions are made for international standards, patent licensing, and the utilization of foundry and packaging services.
These definitive rules further categorize certain semiconductors as critical to national security, triggering heightened restrictions. This includes chips related to quantum computing, current-generation, and mature-node chips, particularly in radiation-intensive environments and for specialized military applications.
In a nuanced approach, the final rules also articulate that any expansion of semiconductor manufacturing capacity is contingent on the addition of cleanroom or other physical space, with “material expansions” defined as an increase in production capacity by more than 5%.
They additionally prohibit recipients from incorporating new cleanroom space or production lines that lead to an expansion of a facility’s production capacity beyond 10%.