To prevent abuse of the CHIPS Act, the White House says companies that take the federal funding are barred from building new and advanced chip factories in China for the next decade.
“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 [their] latest technology overseas,” US Commerce Secretary Gina Raimondo said in a Tuesday press briefing. "These are some of the most stringent taxpayer protections and guardrails we’ve ever had."
President Biden signed the $280 billion CHIPS Act into law last month, $52.7 billion of which is designed to bolster US-based semiconductor manufacturing and address future chip shortages.
Processor makers like Intel and Taiwan’s TSMC are looking forward to receiving the money to build and expand new factories in Ohio and Arizona, respectively. But taking the funding also risks restricting any efforts to establish new fabs in mainland China, one of the world’s biggest markets and the US’s major rival in technology.
Raimondo said the restriction was added to prevent the CHIPS Act from compromising national security. According to the text, the CHIPS Act will only allow affected companies to expand existing factories in China that predominantly serve the country’s market and produce chips using older manufacturing technologies at the 28-nanometer node or higher. (For perspective, Intel is close to producing chips on a 7-nanometer node while TSMC is nearing production on 3-nanometer processors.)
Raimondo said the Commerce Department is already assembling a team to ensure companies that receive funding obey the restrictions and don’t waste the funding. “CHIPS funds cannot be used for stock buybacks,” she added. “CHIPS funds are not intended to replace private capital. That is key. We’re going to look after every nickel of taxpayer money. Taxpayer funds are only used to fill gaps and secure other funding as loan guarantees, not to replace private capital.”
The CHIPS Act’s goal is to “help companies maximize the scale of their projects,” and essentially make them even larger, Raimondo said. But if companies are found violating the conditions, then the US government will enact provisions to “claw back” the funding.
“We will use that clawback authority if, after giving the money to a company, they fail to start their project on time, fail to complete their project on time, fail to meet the commitments that they’ve made,” she added.