US Concludes Rules to Deter China from Chips Worth Billions of Dollars

On Friday, September 22, the United States Commerce Department will release the final rules to eliminate potential fund flow to China. Notably, the initial proposal of the rules was in March.

The laws will seal off subsidy funds from the US to China and other countries highlighted as threats to American national security. The regulation forms part of the final steps to be implemented before the Biden administration kicks off its plans to award $39 billion in subsidies to firms for the manufacturing of semiconductors.

Commerce Department New Regulation for Semiconductor Productions

Notably, the regulation tagged Chips and Science' law offers about $52.7 billion for the production, research, and workforce development of semiconductors in the US. The regulation provides some safeguards by limiting the investment scope of recipients of the US funds.

It specifically prevents the expansion of semiconductor manufacturing to some listed countries, such as China and Russia. Moreover, the regulation specified 10 years as the restriction period for engaging with other countries of concern.

Further, the regulation restricts recipients of the funds from participating in joint research or technology licensing with the listed foreign countries. However, it permits international standards, patent licensing, and similar packaging services.

Recall that in 2022, the Commerce Department rolled out new export controls. The rule was to shut out China from certain semiconductor chips manufactured with US equipment. This rule aimed to slow down Beijing's technological and military advancements.

Meanwhile, Commerce Secretary Gina Raimondo reacted to the government funding situation. While communicating with Congress, the secretary stated:

We have to be absolutely vigilant that not a penny of this helps China to get ahead of us."

Further, Raimondo mentioned that the department is intensifying its operations to ensure speedy approval of the award funds.She revealed they are working under pressure since they are behind the scheduled delivery and want to set everything correctly.

The secretary mentioned it would be worth all the pressure and delay if they took extra weeks or months to get it right. However, she mentioned that the Commerce Department would retrieve the federal awards and incentives if the recipients violated the highlighted regulations and restrictions.

Some Notable Directives of the New US Funding Regulation

The latest rule from the Commerce Department about the government funding awards to semiconductor productions specifies that wafer production is part of semiconductor manufacturing in the country.

It restricts material expansion of semiconductor manufacturing capacity for advanced and cutting-edge facilities within foreign countries of concern. Also, it specified a limitation period of 10 years for this class.

The rule categorizes some semiconductors as critical to national security. Such a class requires tighter regulatory measures. Further, the regulation outlined expanded semiconductor production capacity to include cleanroom and other physical space. It defined material expansions as scaling production capacity by over 5%.

Additionally, the rule restricts recipients from including cleanroom space or the manufacturing line, which results in increasing the facility's production capacity by over 10%.

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