THE Biden administration Tuesday unveiled tight restrictions on new operations in China by chipmakers that get federal funds to build in the United States.

Proposed rules released by the U.S. Commerce Department on Tuesday limit recipients of U.S. funding from investing in the expansion of semiconductor manufacturing in foreign “countries of concern” such as China and Russia, and limits recipients of incentive funds from engaging in joint research or technology licensing efforts with a foreign entity of concern.

The US$50 billion CHIPS and Science Act will now bar firms that win grants from expanding output by 5% for advanced chips and 10% for older technology.

The U.S. Commerce Department also outlined other measures, including a US$100,000 spending cap on investments in advanced capacity in China.

Those so-called guardrails are part of the Biden administration’s efforts to thwart China’s efforts to develop its own advanced chip industry while securing supply of the components that underpin revolutionary technologies, including AI and supercomputers, as well as everyday electronics.

In past years, the United States has blacklisted Chinese technology champions, sought to cut off the flow of sophisticated processors and banned its citizens from providing certain help to China’s chip industry.

The new restrictions tied to the CHIPS Act aim to impose more onerous limitations on companies expected to secure incentives, including industry leaders Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp., which all operate on the Chinese mainland.

The restrictions could hamper longer-term efforts to chase growth in the world’s No. 2 economy, while also making it hard for China to build up cutting-edge capabilities at home.

U.S. Commerce Secretary Gina Raimondo said “these guardrails will help ensure we stay ahead of adversaries for decades to come.”

To ensure U.S. federal funding beneficiaries cannot meaningfully expand advanced production capacity in “countries of concern,” the new rules will ban those firms from spending more than US$100,000 when adding capacity for logic chips more sophisticated than 28-nanometers. They also cannot add more than 5% to the existing capacity of any single plant making these semiconductors in China.

Meanwhile, China is changing approaches on its way to semiconductor self-sufficiency.

The Financial Times quoted sources as saying Tuesday that China would give a few selected champions easier access to subsidies and more control over State-backed research.

Firms such as Semiconductor Manufacturing International, Hua Hong Semiconductor and Huawei Technologies, as well as equipment suppliers like Naura and Advanced Micro-Fabrication Equipment Inc. might benefit from the policy, the report said.

These firms will have access to additional government funding without having to achieve previously necessary performance goals, the report said, adding that they will also be allowed to play a bigger role in State-sponsored research projects.

Reuters reported in December that China is working on a more than 1 trillion yuan (US$145.34 billion) support package for its semiconductor industry, amid tightening U.S. restrictions aimed at slowing its technological advances.

(SD-Agencies)