Following the announcement of the U.S. Commerce Department’s final rules, stringent measures have been put in place to ensure that China and other countries of national security concern do not benefit from the $52 billion allocated for semiconductor manufacturing subsidies. The new regulations, cleared just days ago, mark a crucial step before the Biden administration can begin offering $39 billion in funding for semiconductor production.
Under the provisions of the landmark “Chips and Science” law, a substantial portion of the funding, namely $52.7 billion, has been allocated towards research, workforce development, and semiconductor production in the United States. These measures have been deemed necessary to protect American national security interests.
The regulations, initially proposed back in March, act as legal boundaries aimed at preventing the recipients of the U.S. funding from utilizing it to expand semiconductor manufacturing in countries such as China and Russia. Additionally, recipients are restricted from engaging in joint research or technology licensing endeavors with foreign entities of concern.
This move follows the Commerce Department’s previous actions in October 2022, when they introduced export controls to limit China’s access to certain semiconductor chips made using U.S. equipment. By cutting off Beijing from these advancements, the U.S. aims to impede China’s progress in technology and the military sphere.
Gina Raimondo, the Secretary of Commerce, emphasized the importance of preventing any support from reaching China, stating, “We have to be absolutely vigilant that not a penny of this helps China to get ahead of us.” She further expressed her commitment to swiftly approving award recipients, acknowledging the urgency of the situation.
The regulation explicitly prohibits funding recipients from significantly expanding semiconductor manufacturing capacity in countries of concern for a duration of ten years. Recipients are also restricted from engaging in specific joint research or technology licensing efforts with foreign entities of concern. However, the regulations do allow for international standards, patent licensing, and the utilization of foundry and packaging services.
Additionally, the final rules highlight the inclusion of wafer production within the scope of semiconductor manufacturing. Material expansions, defined as increasing production capacity by more than 5%, are prohibited. Recipients are forbidden from adding new cleanroom space or production lines that would result in exceeding a facility’s production capacity limit of 10%.
Particular semiconductors that are classified as critical to national security will be subject to more stringent restrictions. These include current-generation and mature-node chips for quantum computing, radiation-intensive environments, and other specialized military capabilities.
In the event of funding recipients violating the established restrictions, the Commerce Department has the authority to reclaim federal awards.
With the implementation of these safeguards, the U.S. aims to ensure that the allocated semiconductor funding is used solely for advancing domestic production and research capabilities, and not to the advantage of countries that pose national security concerns.
Frequently Asked Questions (FAQ)
1. What is the purpose of the U.S. Commerce Department’s final rules on semiconductor funding?
The final rules serve to prevent countries like China and Russia, deemed to pose American national security concerns, from benefiting from the $52 billion allocated for semiconductor manufacturing subsidies.
2. How much funding has been made available for semiconductor production?
The “Chips and Science” law provides $52.7 billion for U.S. semiconductor production, research, and workforce development. The Biden administration is preparing to distribute $39 billion of this funding.
3. What are the restrictions placed on the use of the semiconductor funding?
Recipients of U.S. funding are prohibited from expanding semiconductor manufacturing capacity in foreign countries of concern for ten years. They are also restricted from engaging in joint research or technology licensing endeavors with foreign entities of concern. However, international standards, patent licensing, and the utilization of foundry and packaging services are permitted.
4. What happens if funding recipients violate the restrictions?
If recipients of the funding violate the established restrictions, the Commerce Department can reclaim the federal awards they have received.
5. Which semiconductor chips are considered critical to national security?
The final rules classify certain semiconductors, such as current-generation and mature-node chips for quantum computing, those used in radiation-intensive environments, and those supporting other specialized military capabilities, as critical to national security. These will be subject to tighter restrictions.