Biden administration bars CHIPS Act funding recipients from expanding in China

Chipmakers hoping to tap into the Biden administration’s $39 billion semiconductor manufacturing subsidy program will need to sign agreements promising they won’t expand production capacity in China. The requirement was among a handful of funding conditions the US Commerce Department outlined this week after announcing it would begin accepting applications for money from the CHIPS Act in late June. Congress passed the $280 billion measure last July in a rare show of bipartisan cooperation and set aside $52 billion in tax credits and funding for US semiconductor firms to expand domestic production.

“Recipients will be required to enter into an agreement restricting their ability to expand semiconductor manufacturing capacity in foreign countries of concern for a period of 10 years after taking the money,” Commerce Secretary Gina Raimondo told reporters, per the Financial Times. Raimondo did not name China by name. However, the superpower is among the nations the US government considers a “foreign country of concern.”

Additionally, Raimondo said CHIPS Act recipients cannot “knowingly engage in any joint research or technology licensing effort with a foreign entity of concern that involves sensitive technologies or products,” a requirement likely designed to discourage domestic firms from signing agreements like the one Ford recently announced with China’s CATL.

“I also want to be clear that no CHIPS dollars can be spent on stock buybacks,” Raimondo said. “This is about investing in our national security, not enabling these companies to use our money to increase their profits.” The Commerce Department will also require companies applying for more than $150 million to outline how they plan to provide affordable childcare to workers, a funding condition Raimondo said reflects the current labor market. In some instances, the agency may require those same recipients to return some of the money they receive from the CHIPS Act to the government if they generate excess profits. 

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