Companies getting chip funds face limits

The Biden administration announced final restrictions Friday on expansion in China by semiconductor companies that will receive federal funds to build plants in the U.S.

It’s the last regulatory hurdle before the Commerce Department hands out more than $100 billion worth of federal aid intended to boost domestic chipmaking while containing China’s technological advancement.

The Chips Program Office, which is preparing to give out $39 billion in grants and $75 billion in loans and loan guarantees, will bar firms that win that money from substantially growing their output or expanding their physical manufacturing space in China. They will be limited to a 5 percent increase for advanced chips and 10 percent for older technology of 28 nanometers or more mature.

“Chips for America is fundamentally a national security initiative, and these guardrails will help ensure companies receiving U.S. government funds do not undermine our national security as we continue to coordinate with our allies and partners to strengthen global supply chains and enhance our collective security,” Commerce Secretary Gina Raimondo said in a statement.

Curb removed

However, the Commerce Department removed a stringent curb in the initially proposed terms. Previously, the agency included a $100,000 spending cap on investments in advanced capacity in China, which would effectively prevent companies getting federal funding to grow output for chips more advanced than 28 nanometers at all.

The $100,000 cap on China investment was the proposed definition for a “significant” transaction that’s barred by the Chips Act statute. Commerce will now define “significant” as it weighs awards to individual companies rather than through rule-making, a senior Commerce official who briefed reporters on the rule’s evolution said.

That removal came after the Information Technology Industry Council — a powerful industry group that represents Intel Corp., Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., among others — spoke out against the curb. All three chipmakers are expected to secure federal incentives for new facilities on American soil.

At the same time, the Commerce Department expanded the final rule to limit the buildout scale of chipmakers’ facilities in China, in addition to original restrictions that are based only on production capacity. The curb is the binding constraint of the national security guardrails, according to the Commerce official.

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