US issues final rules to prevent chip funds from leaving China

The rules, which aim to prevent chipmakers from using new US subsidies to benefit China, take into account the views of industry.

The Biden administration issued final rules Friday that would prohibit microchip companies vying for a new infusion of federal funds from carrying out certain business expansions , partnerships and research in China, in what it described as an effort to protect U.S. national security.

The regulations come as the administration Biden is preparing to shell out more than $52 billion in federal grants and tens of billions of dollars in tax credits to bolster U.S. national security. the American chip industry. The new rules aim to prevent chipmakers that benefit from U.S. subsidies from passing on their technology, business know-how or other benefits to China.

The Final restrictions will prohibit companies that receive federal money from using it to build chip factories outside the United States. They also prevent companies from significantly expanding semiconductor manufacturing in “foreign countries of concern” – defined as China, Iran, Russia and North Korea – for 10 years after receiving an award, the administration said.

The rules also prevent companies that receive funding from conducting certain joint research projects in those countries, or from granting licenses to technologies that would raise national security concerns in these countries.

If a company violated these safeguards, the Commerce Department said, the government could recover the entire the award given to the company.

“These safeguards will protect our national security and help the United States stay ahead of the curve for decades to come Commerce Secretary Gina M. Raimondo said in a statement.

The restrictions were the subject of intense lobbying by the he chip industry, which collectively makes about a third of its revenues in China. In comments filed this year, chipmakers expressed concerns that overly restrictive measures could disrupt supply chains and hamper their global competitiveness.

Many general principles of the rule, such as the 10-year time limit on new investments in China, were set out in bipartisan legislation authorizing financing for the sector. But Commerce Department officials were responsible for drafting the rule's detailed provisions.

In its final rules released Friday, the department appeared to take the view chipmakers and other players. account. A comparison of the restrictions showed the department made several changes supported by chipmakers, such as removing a specific dollar threshold for transactions that would increase the manufacturing capacity of chipmakers in China, Russia, North Korea or Iran. Under the rule proposed in March, the Commerce Department would have reviewed any transaction increasing a company's semiconductor manufacturing capacity in such a "country of concern" worth more than $100,000.

< p class="css-at9mc1 evys1bk0" >But companies like Taiwan Semiconductor Manufacturing Company have suggested that it would be more pragmatic for the department to monitor the physical expansion of the footprint of semiconductor factories, a standard adopted by the Commerce Department.

It remains to be seen whether any of the changes will provoke a backlash from Republicans on Capitol Hill, who have criticized the Biden administration as n not being tough enough on Beijing and condemned a recent series of trips to China by senior administration officials.

In an interview Friday, Commerce Department officials said...