US details CHIPS Act rules that give China and South Korea some comfort
Allows a little expansion of output from existing Middle Kingdom facilities
The US Commerce Department proposed rules on Tuesday that would limit the amount of CHIPS Act recipients can invest to expand semiconductor manufacturing in countries the US considers “adversarial.”
“The innovation and technology funded in the CHIPS Act is how we plan to expand the technological and national security advantages of America and our allies; these guardrails will help ensure we stay ahead of adversaries for decades to come,” said Secretary of Commerce Gina Raimondo.
The CHIPS Act, passed in August 2022, allocated over $52 billion to advance American semiconductor research, development and manufacturing. Of the total, $39 billion was earmarked for manufacturing incentives.
Under the new rule, transactions above $100,000 that expand existing leading-edge and advanced technology facilities in China, Russia, Iran and North Korea by five percent or more are banned for 10 years from the date of the CHIPS Act award.
Violators of the policy will have to repay the entire amount of the award. Adding new production lines or expanding a legacy facility's production beyond 10 percent is also forbidden. Output of new infrastructure in legacy facilities must be at least 85 percent destined for the domestic market of the adversarial country where the products are made.
The proposed rules also prevent incentive funds from being used on joint research or technology licensing, including agreements to make patents, sharing trade secrets or other info, with a foreign entity of concern.
The final rules will be published later this year. Meanwhile, the government is open to public comment for 60 days.
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The CHIPS Act is expected to cover $7.5 billion of Intel’s planned Arizona fabs and $6 billion of TSMC’s builds on US soil. Samsung, which is building a $25 billion facility in Taylor, Texas, an amount $8 billion more than originally expected thanks to inflation, will likely receive around $3.7 billion.
Samsung's home, South Korea, balked at news that the CHIPS Act could see its chipmaking champions SK Hynix forced to limit their activities in China.
Korea’s Ministry of Trade, Industry and Energysaid in early March it would consult with relevant US authorities to ensure the position of South Korean companies “can be fully reflected in the semiconductor support law.”
According to local media, South Korea’s industry has expressed some relief at the details released on Tuesday by the US Department of Commerce.
"It seems we may have avoided the worst case," a related company official reportedly said.
Last week, South Korea took action to return some semiconductor manufacturing to home soil by annoucing a ₩300 trillion ($230 billion) investment plan, plus initiatives aimed at achieving leadership in displays, batteries, biopharmaceutical, electric vehicles, and robots.
President Seok-Yeol Yoon said the planned semiconductor ecosystem "overwhelms Texas in the United States." ®