Feds Adding Guardrails to Semiconductor Manufacturing Funding

The Biden administration’s signature funding program for U.S. manufacturing – the 2022 Chips Act that provides incentives to semiconductor makers to beef up their domestic chip-making operations – has begun to craft additional rules that aim to keep the fruits of the semiconductor manufacturing expansion out of the hands of major U.S. adversary nations.

The U.S. Department of Commerce (DoC) is working to create national security “guardrails” for the CHIPS Incentives Program to ensure that technology and innovation funded by the CHIPS and Science Act are not used for malign purposes by adversaries of the U.S. and its allies, according to a notice of proposed rulemaking.

The department will accept public comment on the notice for 60 days starting March 23, with a final rule expected later this year.

The proposed national security guardrails, the agency said, will put in place additional commitments to ensure that funding provided through the program does not directly or indirectly benefit four adversarial countries – the People’s Republic of China, Russia, Iran, and North Korea.

The law already includes numerous limitations for funding recipients. They are prohibited from using the money in other countries, significantly restricted from investing in most semiconductor manufacturing in adversary nations for 10 years after the date of award, and limited from engaging in joint research or technology licensing efforts with an adversary country that involves technology or products that raise national security concerns.

In unveiling its proposal for additional security guardrails, the Commerce Department said it is “issuing, and requesting public comments on, a proposed rule to set forth terms related to these limitations for funding recipients to notify the Secretary of Commerce of any planned significant transactions that may be prohibited.”

“The innovation and technology funded in the CHIPS Act is how we plan to expand the technological and national security advantages of America and our allies; these guardrails will help ensure we stay ahead of adversaries for decades to come,” said Secretary of Commerce Gina Raimondo.

The Commerce Department said the proposed guardrails will advance shared national security interests as the U.S. continues coordinating and collaborating with its allies and partners to make global supply chains more resilient and diversified.

“CHIPS for America is fundamentally a national security initiative and these guardrails will help ensure malign actors do not have access to the cutting-edge technology that can be used against America and our allies. We will also continue coordinating with our allies and partners to ensure this program advances our shared goals, strengthens global supply chains, and enhances our collective security,” said Raimondo.

According to the Commerce Department, the proposed guardrails effort includes:

  • Establishing standards to restrict advanced facility expansion in foreign countries of concern;
  • Limiting the expansion of legacy facilities in adversarial nations;
  • Classifying semiconductors as critical to national security;
  • Reinforcing U.S. export controls; and
  • Defining restrictions on joint research and technology licensing efforts with adversary nations.