US Implements New Regulations to Inhibit Semiconductor Subsidies in China and Other Countries

Arrijal Rachman, CNBC Indonesia

Tech

Sunday, 09/24/2023 21:00 WIB

Photo: Chinese and US flags displayed on a printed circuit board with semiconductor chips. (REUTERS/Florence Lo//File Photo)

Jakarta, CNBC Indonesia – The United States government will issue special regulations aimed at inhibiting subsidies for semiconductor manufacturers in China and other countries that are considered to pose American national security problems.

The rule was issued by the US Department of Commerce before the Biden administration could start providing subsidies amounting to US$ $39 billion or the equivalent of Rp. 598.92 trillion for semiconductor production. The subsidy provision itself is part of a provision in the “Chips and Science” law that provides US$52.7 billion for US semiconductor production, research and workforce development.

Reported Reutersthe new barrier regulations were first proposed in March by establishing “guardrails” that limit recipients of US funds from investing in expanding semiconductor manufacturing with foreign countries of concern such as China and Russia.

Provisions in these regulations also limit recipients of incentive funds from engaging in joint research or technology licensing efforts with foreign entities of particular concern to the United States.

In October 2022, the US commerce department issued new export controls to cut off supplies of certain semiconductor chips made with US equipment in an effort to slow Beijing’s technological and military advances.

Photo: Chip Illustration (Doc: Freepik)

“We have to be absolutely vigilant that not one cent of this regulation will help China get ahead of us,” US Commerce Secretary Gina Raimondo told Congress on Tuesday.

Raimondo also ensured that she would work as quickly as possible so that the subsidy regulations themselves could be issued immediately. However, if fund recipients violate the restrictions, the U.S. Department of Commerce can claw back those incentives from the federal government.

“I felt the pressure,” Raimondo said. “We are behind but what is more important is that we do it right. And if we need another month or a few weeks to fix it, I will defend it because it is necessary.”

The rule would prohibit grant recipients from significantly expanding semiconductor production capacity in foreign countries of interest to the U.S. government for 10 years.

This regulation also limits the recipients of several joint research or technological licensing efforts with foreign institutions that are of concern to the government, but allows international standards, the granting of patent rights, and the use of assembly and packaging services.

The final rule prohibits material expansion of semiconductor production capacity for front-end and advanced facilities in foreign countries of concern for 10 years. This also clarifies that semiconductor wafer production is included in semiconductor manufacturing.

The provisions that could make Xi Jinpin’s country anxious also link the expansion of semiconductor production capacity to the addition of clean space or other physical space, which defines material expansion as an increase in production capacity of more than 5%.

The provisions also prohibit recipients from adding cleanroom space or new production lines that result in an increase in the facility’s production capacity beyond 10%.

In addition, it also classifies some semiconductors as critical to national security, triggering tighter restrictions, including on current-generation quantum computing chips and mature-node chips, in radiation-intensive environments, and for other special military capabilities.

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