The US Commerce Department has proposed rules and policies to stop China and other foreign nations of concern from benefitting from the $52 billion fund of the US Semiconductor Manufacturing and Research program. The proposed rules will affect countries like China, Russia, North Korea, and Iran.
Companies that receive grants under the federal semiconductor fund will not be allowed to invest or expand their semiconductor business in countries like China and Russia. Moreover, they will also not be allowed to engage in joint research or share technology related to semiconductors with these nations. For the next 10 years, the companies who receive the grant will be barred from building or expanding semiconductor manufacturing factories in countries that come under the list of foreign entities of concern.
The US Commerce Department has also classified the chips according to their importance and designated some advanced chips including the quantum chips and military use chips as ‘critical to national security’. These chips will be subject to tighter restrictions as they play a critical role in the technological advancement of the country.
Commerce Secretary Gina Raimondo said that the tighter restrictions cover chips used in current-generation, mature-node chips used for quantum computing, chips used in radiation-intensive environments, and other specialized military capabilities. She further added that these restrictions would help to ensure that the US stays ahead of its adversaries in the coming decades.
What is the US Semiconductor Manufacturing and Research Fund?
The US Semiconductor Manufacturing and Research Program is a specially designed fund under the CHIPS and Science Act of 2022. The Biden administration created the $52 billion fund to encourage the domestic manufacture of semiconductor chips, as well as continued research in the field.
On Tuesday the Commerce Department released the proposed rules and regulations for the use of these funds. From late June, the department plans to start accepting applications for a $39 billion manufacturing subsidy program. The law also creates a 25% investment tax credit for building chip plants estimated to be worth $24 billion.
The application will be a five-step process where companies will have to submit a workforce plan that includes an outline of workforce needs. Companies that are accepted and receive more than $150 million in direct funding will have to comply with additional rules and regulations. These companies for instance will be required to share with the US government a portion of any cash flows or returns that exceed the applicant’s projections by an agreed-upon threshold.
The companies will get somewhere around 5% to 15% of project capital expenditure as direct funds and the total amount of an award including a loan or loan guarantee, will not exceed 35% of project capital expenditures. All recipients of the fund will be required to sign an exclusive agreement accepting restrictions on the expansion of semiconductor manufacturing capacity in foreign countries of concern like China for 10 years after winning the funding.
Related:
- China Sees Sharp Fall in Semiconductor Imports: US Sanctions Taking a Toll on the Industry
- China Said to Use Whole Nation Approach to become Self Reliant in Semiconductors and Combat US
- China creates its first refrigerator for quantum chips
