US Commerce Department Finalizes Guardrails for CHIPS

The US Commerce Department announced security guardrails that semiconductor manufacturers must follow to receive funding under the CHIPS and Science Act. The Act was passed last year to boost domestic semiconductor research and manufacturing as the US seeks to better compete against China and address an ongoing global semiconductor shortage.

The US Commerce Department’s guardrails for how more than $100 billion in government funding will be doled out included a provision that disbursements can’t expand semiconductor manufacturing in foreign countries of concern. “The statute prohibits the material expansion of semiconductor manufacturing capacity for leading-edge and advanced facilities in foreign countries of concern for 10 years from the date of award,” according to a press release from the Department of Commerce.

The guardrails include provisions that limit the expansion of legacy facilities in foreign countries of concern. Those companies will be limited to a 5% increase for advanced chips and a 10% increase for legacy chips. The statute prohibits recipients of CHIPS funds from using the money to construct, modify, or improve a semiconductor facility outside of the US.

“While the statute allows companies to expand production of legacy chips in foreign countries of concern in limited circumstances, today’s rule classifies a list of semiconductors as critical to national security, thereby subjecting them to tighter restrictions,” the release says. The second provision of the ruling restricts recipients from certain joint research or technology licensing efforts with foreign entities of concern. The Commerce Department also stated it could ‘claw back’ the entire federal financial assistance award if the guardrails were violated.

“CHIPS for America is fundamentally a national security initiative and these guardrails will help ensure companies receiving US Government funds do not undermine our national security as we continue to coordinate with our allies and partners to strengthen global supply chains and enhance our collective security,” said Commerce Secretary Gina Raimondo.