New Regulations Secure U.S. Semiconductor Subsidies from China

Initially introduced in March, these regulations act as a protective framework by imposing restrictions on recipients of U.S. funding.

The U.S. Commerce Department has unveiled its definitive regulations aimed at safeguarding semiconductor manufacturing subsidies from benefiting China and other nations that raise American national security concerns.

This marks the final step before the Biden administration can commence the distribution of $39 billion in subsidies for semiconductor production, made possible through the groundbreaking “Chips and Science” legislation, which earmarks $52.7 billion for various facets of U.S. semiconductor development.

Initially introduced in March, these regulations act as a protective framework by imposing restrictions on recipients of U.S. funding.

These recipients are barred from investing in expanding semiconductor manufacturing in countries of concern such as China and Russia.

Additionally, they are restricted from participating in collaborative research or technology licensing endeavors with entities from these countries.

The U.S. Commerce Department had previously implemented new export controls in October 2022, specifically targeting certain semiconductor chips produced with U.S. equipment and used by China.

This move was motivated by the objective of slowing Beijing’s technological and military advancements, as affirmed by Commerce Secretary Gina Raimondo.

Raimondo emphasized the importance of preventing any diversion of these funds to China, stating, “We have to be absolutely vigilant that not a penny of this helps China to get ahead of us.”

The department has the authority to revoke federal awards if recipients fail to comply with these restrictions.

Raimondo acknowledged the urgency of approving these awards, but also stressed the need for accuracy and diligence in the process.

She stated, “I feel the pressure…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.”

Under the final rules, funding recipients are prohibited from substantially expanding semiconductor manufacturing capacity in countries of concern for a period of 10 years.

It also places limitations on joint research and technology licensing initiatives involving entities from such countries, while permitting adherence to international standards, patent licensing, and utilizing foundry and packaging services.

Furthermore, these rules categorize certain semiconductors as critical to national security, subjecting them to more stringent restrictions.

This includes quantum computing chips, current-generation and mature-node chips, those used in radiation-intensive environments, and chips with specialized military applications.

In summary, the U.S. Commerce Department’s issuance of these final regulations underscores the nation’s commitment to safeguarding its semiconductor technology and ensuring that subsidies are utilized to advance American interests and national security.

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