US Bans Tech Firms From Building Chinese Factories

The Biden administration continues its efforts to ramp up domestic semiconductor production in the United States, with a blunt warning to technology firms about China.

During a speech on Tuesday, Commerce Secretary Gina Raimondo said the administration was putting place “clear guardrails” about those receiving federal funding from the recently passed and signed into law US Chips and Science Act (Chips).

Raimondo warned that those firms that receive Chips funds “cannot compromise national security” and they will not be allowed to invest the money in China. She also said “they can’t send the latest technology overseas.”

Chips act

The Biden administration has said previously that the US Chips Act is the final part of “an industrial strategy to revitalise domestic manufacturing, create good-paying American jobs, strengthen American supply chains, and accelerate the industries of the future.”

It sets aside $52 billion to significantly boost American semiconductor production and research over five years.

The US Department of Commerce hopes to begin seeking applications by next February for $39bn in government semiconductor subsidies to build new production facilities in the US.

The plan will also give a 25 percent investment tax credit for chip plants, where construction begins from 2023.

The legislation will also authorise $200 billion over 10 years to boost US scientific research to better compete with China.

China targetted

And it is clear that China is being firmly targetted by US officials.

In July the heads of the FBI and UK’s MI5 for the first time shared a public platform in London, and warned about the ‘immense’ threat posed by Chinese government’s espionage operations.

The warning came during a meeting with business leaders, and the two heads warned that the Chinese government was set on stealing their technology for competitive gain.

That same month the US reportedly considered targeted restrictions that would bar China’s SMIC from manufacturing advanced chips, while allowing Chinese factories to continue making commodity chips, in order to avoid exacerbating a worldwide semiconductor shortage.

Then in early August, media reports suggested the US was considering blocking shipments of certain types of advanced chipmaking equipment to China in order to hobble the expansion of memory chip makers operating in the country.

The US followed through on this weeks later, when it introduced export controls on design software and substrate materials to block Chinese companies from using advanced chip manufacturing processes.

And then last week the US instructed two leading American chipmakers, Nvidia and AMD, to stop selling some of their AI-related technology to China.

National security

Now this week in her speech, the US Commerce Secretary Gina Raimondo confirmed that once a company receives federal funding, it will not be allowed to invest in China.

Raimondo said that the money from federal funding cannot be used for stock buybacks, as the funds “are intended to help companies maximise the scale of their projects.”

“We’re also going to be implementing the guardrails to ensure those who receive CHIPS funds cannot compromise national security by – they’re not allowed to use this money to invest in China, they can’t develop leading-edge technologies in China, they can’t send latest technology overseas,” said Raimondo

She later added that this ban would be for ten years, and that companies who receive the money can “only expand their mature node factories in China to serve the Chinese market.”

“These are some of the most stringent taxpayer protections and guardrails we’ve ever had, and the American people are counting on us to get it right,” said Raimondo. “And it’s a responsibility that we take very seriously.”

When asked about the Biden’s position on Intel, which had been planning to boost silicon wafer production in China, Raimondo replied with the following.

“So, as – as I’ve said, if they take the money, they can’t use the money to invest in China, they can’t build a leading-edge fab in China for a period of 10 years,” said Raimondo. “If they expand their mature node factories in China, it’s only to serve the Chinese market. And, by the way, if they take money and then do any of those things, we’ll claw back the money.”

The US currently produces approximately 10 percent of the global supply of semiconductors, down from nearly 40 percent in 1990.

Raimondo also said that currently the United States consumes more than 25 percent of the world’s leading-edge chips and produces zero of those chips.