US Lawmakers Seek to Prohibit Chips Act Beneficiaries from Using Chinese Tools
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US Lawmakers Push to Limit Chinese Influence in US Chipmaking Industry
In a move to curtail Beijing's influence on US chip production, lawmakers in the United States have proposed a bill that would prohibit companies receiving federal funding for semiconductor manufacturing from using equipment sourced from China and several other nations. This bipartisan initiative targets companies such as Intel Corp. and Taiwan Semiconductor Manufacturing Co, forbidding them from purchasing chipmaking equipment from entities linked to China, Russia, North Korea, and Iran. The restriction applies only to US-based facilities benefitting from the 2022 Chips and Science Act, spare to their overseas operations.
Revitalizing the Domestic Semiconductor Industry
The Chips and Science Act allocated $39 billion in grants, along with 25% tax credits and $75 billion in loans and guarantees, aimed at rejuvenating the US semiconductor industry after years of outsourcing to Asia. This legislation has sparked significant domestic investment, with more than $400 billion announced by various companies. The momentum is evident in the surge of construction spending on computer and electronics facilities in 2024, which increased to over 20 times the pre-Chips Act average.
A substantial portion of the grant money, approximately 85%, is earmarked for advanced projects by major industry players such as Intel, TSMC, Samsung Electronics, and Micron Technology. Recent weeks have seen the unveiling of several preliminary awards, specifically targeting supply-chain projects. More announcements are anticipated throughout the remainder of the year.
Global Domino Effect
The US initiative has spurred a worldwide subsidy race, with other governments, including those in Brussels and Seoul, developing programs to bolster their own semiconductor supplies. Concurrently, China is stepping up its game, launching the largest semiconductor investment fund in its history last month, with a budget of $47.5 billion. This fund, known as Big Fund III, focuses on establishing an independent Chinese supply chain, especially in chip equipment areas traditionally dominated by the US, Japan, and the Netherlands.
Concerns Over Chinese State Subventions
US lawmakers highlighted China’s aggressive market strategies and heavy subsidies, fearing that unchecked advancements could enable Chinese-manufactured legacy tools to enter US and allied production facilities. There is ongoing apprehension about both cutting-edge and legacy equipment. The Chips Act already restricts recipients from significantly expanding their Chinese operations or increasing their manufacturing footprint in the country.
Chinese equipment manufacturers have made notable inroads, now presenting tools to American companies. However, these discussions may be partly leveraged to negotiate better pricing with American toolmakers such as Applied Materials Inc., Lam Research Corp., and KLA Corp.
As the United States endeavors to revive its domestic semiconductor manufacturing sector, measures like this proposed ban are seen as critical in preventing foreign entities from compromising the integrity and security of the nation’s chip production facilities.
