US chipmakers must agree not to expand capacity in China for a decade if they receive money from a $39bn federal fund designed to build a leading-edge domestic semiconductor industry, according to new commerce department rules.
The department on Tuesday requested applications for funds from the Chips Act passed by Congress last year, as it launched a landmark industrial policy program designed to counter China.
In announcing the move, commerce secretary Gina Raimondo stressed that the department would implement safeguards to ensure the program is not abused.
“Recipients must sign an agreement limiting their ability to expand semiconductor manufacturing capacity in the foreign country concerned for 10 years after taking the money,” said Raimondo, who did not name China.
He added that companies receiving funding must also not “knowingly engage in joint research or technology licensing efforts with foreign entities of concern involving sensitive technologies or products”.
Congress passed the Chip Act in an effort to create an industry capable of producing cutting-edge semiconductors, which are now mostly made in Taiwan. In addition to measures to help American companies, the commerce department has taken steps to slow China’s chipmaking industry, including the imposition of sweeping export control regulations last October that will make it difficult for Beijing to acquire advanced chips.
“Our goal is to ensure that the United States . . . is the only country in the world where every company that can produce the most advanced chips will do so in the United States at scale,” Raimondo said.
Commerce department officials said that companies that received more than $150 million must return the money to the government when returns exceeded the original forecast by an agreed threshold.
The official said that $39bn could be used to provide another $75bn in federally supported funding. “The total cost of the possible program . . . could be more than $100 billion.
Raimondo said the company would have to agree to other restrictions, including a ban on using the money to buy back shares or pay dividends.
“I also want to be clear that no dollar chips can be spent on stock buybacks,” Raimondo said. “This is about investing in national security, not allowing these companies to use their money to increase their profits.”
Raimondo added that companies applying for more than $150 million must also explain in advance how they will provide affordable childcare for their workers – a step that reflects concerns that the US does not have enough workers to ensure the goals of the CHIPS Act. .
“It’s a math problem. We need more people in the workforce. Right now we don’t have affordable childcare, which is the biggest factor keeping people, especially women, out of the workforce,” Raimondo said.
Do it Demetrius of Sevastopol on Twitter