U.S. tech companies that receive government funding will be banned from building ‘advanced tech facilities’ in China for a decade, the Biden administration announced, as it outlined its plans to increase domestic production of semi -drivers.
The requirements fall under the US government’s nearly $53billion (£46billion) plan to ramp up manufacturing of semiconductor chips – the ‘brains’ of every electronic device, from cars to home appliances – which are mainly produced in Asia.
The U.S. Chips and Science Act (Chips), approved by Congress in August, is part of the U.S. response to a longstanding tech dispute between Washington and Beijing, as U.S. companies demand more government support to reduce dependence on components produced in Chinese factories. .
The US Commerce Department said it hopes to start seeking applications by next February for $39 billion in government semiconductor subsidies to build new production facilities in the United States. The plan will also provide a 25% investment tax credit for chip factories, construction of which will start from 2023.
“We will also put safeguards in place to ensure that those who receive Chips funds cannot compromise national security,” said US Commerce Secretary Gina Raimondo. “They are not allowed to use this money to invest in China; they cannot develop advanced technologies in China; they cannot send the latest technologies abroad.
The United States currently produces only about 10% of the world’s semiconductor supply; most chips are made in factories in Taiwan and South Korea.
Global shortages of computer chips, caused by the coronavirus pandemic, have led to major production delays for carmakers in the UK and beyond, as well as for technology companies and other manufacturers.
In addition, the industry has taken on increased geopolitical importance as China has begun to assert itself on the world stage under the leadership of its President, Xi Jinping, including by threatening Taiwan.
This led to investment and an expansion of semiconductor production in the United States, as well as in Japan and the EU.
“These funds are intended to help companies maximize the scale of their projects. We will push companies to become bigger and bolder,” Raimondo said. “We are going to negotiate these deals one by one,” she added, saying companies receiving public funds should “prove to us that the money is absolutely necessary to make these investments.”
The Chips Act commits a total of $280 billion to high-tech manufacturing and research, and is designed to increase US competitiveness with China.
The Chinese Embassy in Washington had previously opposed the bill, saying it was reminiscent of a “Cold War mentality”.
The US crackdown on selling technology to China has already started to have an impact, with US chip designer Nvidia revealing last week that US officials had told it to stop exporting two cutting-edge computer chips to China. for artificial intelligence work.