The US Commerce Department has announced the issuance of final rules aimed at preventing semiconductor manufacturing subsidies from benefiting countries like China that are considered national security concerns by the United States. These rules represent the last step before the Biden administration can begin distributing US$39 billion in subsidies for semiconductor production, in line with the “Chips and Science” law which allocates US$52.7 billion for US semiconductor production, research, and workforce development.

The regulations, initially proposed in March, are designed to establish “guardrails.” They prohibit recipients of US funding from investing in the expansion of semiconductor manufacturing in countries such as China and Russia, which are deemed concerns. Furthermore, the rules limit funding recipients from participating in collaborative research or technology licensing ventures with foreign entities of concern.

Last October, the Commerce Department implemented new export controls to restrict China’s access to specific semiconductor chips produced with U.S. equipment, a move intended to slow Beijing’s technological and military advancements.

Commerce Secretary Gina Raimondo emphasized the importance of preventing any funding from benefiting China, stating that they must be vigilant to ensure not a penny supports China’s technological progress.

The rules empower the Commerce Department to reclaim federal awards if recipients fail to adhere to these restrictions. Raimondo acknowledged the urgency of approving awards, noting that while there may be pressure to expedite the process, getting it right is paramount, even if it takes a few more weeks.

The rules represent a crucial step in safeguarding U.S. semiconductor technology and preventing its exploitation by nations considered national security risks.