US seeks to block China from financing $52 billion in chip production

By David Shepherdson

WASHINGTON (Reuters) – The U.S. Commerce Department on Tuesday unveiled proposed rules to block China and other countries from using $52 billion in semiconductor production and research funding.

The proposal would limit recipients of U.S. funds from investing in expanding semiconductor production in foreign countries such as China and Russia, and restrict recipients of incentives from engaging in joint research ventures or technology licensing with a foreign company deemed to be of concern.

The move covers semiconductors “including current-generation chips and mature process technology used for quantum computing, radiation-intense environments and other specialized military capabilities.”

Commerce Secretary Gina Raimondo said, “These sanctions will help us stay ahead of the competition for decades.”

The Commerce Department plans to begin accepting applications for a $39 billion semiconductor manufacturing subsidy program in late June. The bill creates a 25% investment tax credit for building chip factories, valued at $24 billion.

In October, the department issued new export restrictions barring some of China’s semiconductor chips from being shipped anywhere in the world with U.S. equipment, expanding its reach in an effort to slow Beijing’s technological and military advances.

The rules build on restrictions sent in letters to major equipment makers KLA, Lam Research and Applied Materials last year, calling for a freeze on equipment exports to all Chinese companies that make advanced logic chips.

The Commerce Department said Tuesday it would tighten the restrictions by aligning technology export limits between export controls and national security safeguards, including a “more restrictive limit for logic chips than is used for export controls.”