The Biden administration is announcing new restrictions on semiconductor manufacturers who operate in China.
- The new restrictions will affect manufacturers who have accepted federal funds for operations in the U.S.
- Through the CHIPS and Science Act, the government will prevent manufacturers who receive funding from expanding their operations by 5% for advanced chips and 10% for older chips, Bloomberg reports.
- The Commerce Department, which is in charge of distributing the funding, will release further restrictions. Sources told Bloomberg that further restrictions will include a $100,000 spending cap on investments in China.
- These new restrictions are part of the Biden administration’s efforts to reduce Chinese advancement in semiconductor chip manufacturing and strengthen the U.S. supply.
Why it’s news
The new restrictions will especially affect large manufacturers such as Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung, and Intel. These entities, which operate in China, have already announced investments in the U.S. and are expected to benefit from incentives in the CHIPS Act.
While slowing growth in the world’s largest semiconductor market, the new restrictions would also make it difficult for Chinese manufacturers to cultivate cutting-edge technology.
The new rules will restrict growth in “countries of concern.” This includes China and Russia, Bloomberg reports. Though the restrictions will prevent significant expansion, companies can still upgrade existing manufacturing plants to produce more advanced products. The regulation on advanced chip manufacturing investments will last 10 years.
Manufacturers will also be barred from expanding their existing facilities by more than 10%. If a company wants to build a facility to produce less-advanced chips, 85% of that facility’s total output must be designated for the host country. The expanding company must also notify the Commerce Department.
The restrictions will also prevent grant recipients from working alongside countries that are a concern to U.S. interests. This includes conducting research or licensing technology. The proposed regulations will have 60 days of public comment available before being finalized.
China has made comments opposing the CHIPS Act since it passed last year. Following restrictions imposed in October, chip stocks in the Asian market fell. Chinese officials condemned the limits last year, claiming they would hurt the global economy and affect supply chains.