Recent reports indicate that American semiconductor companies intending to benefit from the $39 billion semiconductor manufacturing subsidy program established by the CHIPS Act are prohibited from expanding their production capacity in China. These chip manufacturers will be required to sign various agreements and legal documents that commit them to refraining from expanding their chip production facilities in China.
The CHIPS Act, which stands for Creating Helpful Incentives to Produce Semiconductors, is a program that was passed in the United States in July 2022, to support the domestic semiconductor industry. The program will provide $39 billion in subsidies to American chip manufacturers, with the goal of increasing domestic production and reducing the country’s reliance on foreign-made semiconductors.
As per Financial Times, Commerce Secretary Gina Raimondo has informed the press that companies availing themselves of programs under the CHIPS Act will be obligated to sign an agreement that limits their capability to expand their semiconductor manufacturing capacity in countries of concern for a 10-year duration after receiving the funds. Although the Biden administration did not explicitly name China as the country of concern, the prevailing political and economic circumstances suggest that the administration is specifically targeting China.
The Commerce Secretary has further clarified that companies receiving funds under the CHIPS Act must not engage in joint research or technology licensing efforts with foreign entities of concern, involving sensitive technologies or products. This stipulation is aimed at deterring domestic companies from entering into agreements like the one recently announced by Ford with China’s CATL. Along with Ford, US semiconductor companies such as Intel, Qualcomm, Broadcom, Micron Technology, and Texas Instruments have either had or still maintain business ties with China in the semiconductor industry.
