Biden administration limits CHIPS Act funded companies from expanding in China

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Last year, the Biden Administration launched the CHIPS Act to boost the US semiconductor industry and outcompete China in semiconductor manufacturing, making the US the premier destination for leading chip manufacturers. And as part of the act, the government launched the first round of funding worth $39 billion aimed at constructing, expanding, and modernizing commercial facilities.

However, according to a report from the Financial Times, companies looking to benefit from this funding must adhere to specific conditions, including restrictions on expanding production capacity in foreign countries of concern, such as China, for ten years.

“Our goal is to make sure that the United States is the only country in the world where every company capable of producing leading-edge chips will be doing that in the United States at scale,” said commerce secretary Gina Raimondo.

In addition to the ban on expanding fabs in China, CHIPS act recipients cannot knowingly engage in any joint research or technology licensing effort with a foreign entity of concern that involves sensitive products or technologies. This aims to prevent domestic firms from partnering with Chinese companies like Ford’s recent partnership with CATL.

Ensuring appropriate use of funds

To ensure the funds are used aptly, the government will require companies to outline their plans for providing affordable childcare for workers if they apply for more than $150 million. The companies also cannot use the funds for share buybacks or dividend payments. Moreover, Raimondo also announced that companies will need to return some of the money they receive from the CHIPS Act to the government if they generate excess profits.

“This is about investing in our national security, not enabling these companies to use our money to increase their profits. We need more people in the labour force. We right now lack affordable childcare, which is the single most significant factor keeping people, especially women, out of the labour force,” said Raimondo.

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