US semiconductor companies cannot spend money building advanced factories in China or making chips for the US market.
US semiconductor companies that accept $280 billion in CHIPS and Science Act incentives will be banned from investing in China. The latest news comes directly from Commerce Secretary Gina Raimondo, who briefed reporters at the White House yesterday.
CHIPS, or the America’s Semiconductor Manufacturing Favorable Incentives Act, totaled $52 billion of $280 billion and is part of the federal government’s effort to revive domestic semiconductor manufacturing in the United States, which is lagging behind Taiwan and China.
As a result, technology companies receiving federal funding under the CHIPS Act will be banned from doing business in China for ten years. Raimondo described the measure as “a fence to ensure that people receiving CHIPS funding will not threaten national security.”
“They are not allowed to use this money to invest in China, they cannot develop advanced technology in China, and they cannot ship the latest technology abroad.” “.result.
The ban means companies cannot use the funds to build advanced factories in China or produce chips for the US market in the eastern country. However, tech companies can only expand their existing chip manufacturing capacity in China if the products are targeted only at the Chinese market.
“If they take the money and do any of this, we will refund the money,” Raimondo replied to another reporter. Raimondo confirmed that American companies are ready to comply with the stipulated bans.
The details and specifics of these bans will be decided by February 2023. However, Raimondo clarified that the overall strategy revolves around protecting the national security of the United States. As such, it’s unclear whether companies that have already invested in China and announced expanded node production in the country should back away from their plans.
“We are going to hire people who have been hard-nosed negotiators in the private sector, they are experts in the semiconductor industry, and we are going to negotiate one deal at a time and really put pressure on these companies to prove to us – we need them to do it’s in terms of financial disclosure, prove to us in terms of capital investment – prove to us that the money is absolutely necessary to make that investment.”
Since a rare bipartisan piece of legislation, the Chip Act, was signed into law in August, Micron has announced it will invest $40 billion in US manufacturing by the end of the decade.
Qualcomm and GlobalFoundries announced a $4.2 billion partnership to boost semiconductor production at the latter’s New York facility. Earlier, Samsung (Texas and Arizona) and Intel (New Mexico) announced multibillion-dollar investments in chip factories.
Of the $52 billion allocated to the Chip Act, $39 billion goes to stimulating manufacturing, $13.2 billion goes to R&D and workforce development, and the remaining $500 million goes to semiconductor supply chain activities. It also introduced a 25 percent investment tax credit on capital expenditures used to manufacture semiconductors and related equipment.
According to the Semiconductor Industry Association (SIA), semiconductor manufacturing is a $555.9 billion industry that will open a new window by 2021, with 34.6% ($192.5 billion) of that revenue going to China. However, Chinese manufacturers still rely on US semiconductor designs and technology, but manufacturing is a different matter. Semiconductor manufacturing requires years of supply chains and expensive equipment such as extreme ultraviolet lithography systems.
To overcome these problems, foreign governments, including the Chinese government, have consolidated the industry and continuously provided incentives for chip manufacturing, resulting in a decline in U.S. semiconductor manufacturing capacity from 56.7% in 2013 to 43.2% in 2021. year. However, U.S. chip production accounts for only 10 percent of the world’s total.
The Chip Act and China’s investment ban measures have also helped boost U.S. chip manufacturing. In 2021, 56.7% of U.S.-headquartered companies’ manufacturing bases will be located overseas, according to the SIA.
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Post time: May-29-2023