The U.S. Commerce Department on Friday is issuing final rules to prevent semiconductor manufacturing subsidies from being used by China and other countries deemed to pose American national security concerns.
The regulation is the final hurdle before the Biden
administration can begin awarding $39 billion in subsidies for semiconductor
production. The landmark "Chips and Science" law provides $52.7
billion for U.S. semiconductor production, research and workforce development.
The regulation, first proposed in March, sets
"guardrails" by limiting recipients of U.S. funding from investing in
expanding semiconductor manufacturing in foreign countries of concern like
China and Russia, and limits recipients of incentive funds from engaging in
joint research or technology licensing efforts with foreign entities of
concern.
In October 2022, the department issued new export controls
to cut China off from certain semiconductor chips made with U.S. equipment in
its bid to slow Beijing's technological and military advances.
"We have to be absolutely vigilant that not a penny of
this helps China to get ahead of us," Commerce Secretary Gina Raimondo
told Congress Tuesday.
If funding recipients violate restrictions, Commerce
Department can claw back federal awards.
Raimondo told Congress she is working as fast as possible to
get awards approved.
"I feel the pressure," Raimondo said. "We are
behind but it is more important that we get it right. And if we take another
month or a few more weeks to get it right, I will defend that because it's
necessary."
The regulation prohibits funding recipients from
significantly expanding semiconductor manufacturing capacity in foreign
countries of concern for 10 years. It also restricts recipients from some joint
research or technology licensing efforts with foreign entities of concern but
allows for international standards, patent licensing, and utilizing foundry and
packaging services.
The final rules prohibit material expansion of semiconductor
manufacturing capacity for leading-edge and advanced facilities in foreign
countries of concern for 10 years. It also clarifies wafer production is
included within semiconductor manufacturing.
The final rule ties expanded semiconductor manufacturing
capacity to adding cleanroom or other physical space, defining material
expansions as increasing production capacity by more than 5%.
The rule prohibits recipients from adding new cleanroom
space or production lines that result in expanding a facility’s production
capacity beyond 10%.
The rule also classifies some semiconductors as critical to
national security, triggering tighter restrictions, including quantum computing
current-generation and mature-node chips, in radiation-intensive environments,
and for other specialized military capabilities.
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