Chips Funding :- New limitations on semiconductor firms doing business in China are anticipated to be announced by the American government.
Once the CHIPS Act was passed in 2022 and businesses started receiving additional government cash, the limits were put in place.
When China-based businesses are subject to stricter regulations, semiconductor companies may come under pressure.
The amount of government funding semiconductor firms receive if they have operations in China may be restricted by new regulations coming from President Joe Biden’s administration. The announcement follows the CHIPS and Science Act’s passage by Congress last year.
According to the Commerce Department, as reported by Bloomberg, the CHIPS Act may prevent grant-winning businesses from increasing their output.
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Companies will be restricted to spending no more than $100,000 on investments in China under new rules that are anticipated to be unveiled on Tuesday. Also, the new limitations would prevent the federal government from subsidizing businesses that are based in “countries of concern,” which also includes Russia.
The new rules are also anticipated to prohibit semiconductors receiving federal support from the United States from signing cooperative research or licensing agreements with businesses or nations of concern.
According to the article, among the organizations on the Commerce Department’s list of concern are Yangtze Memory Technology, SenseTime Group, and Huawei Technologies Co.
The Biden administration’s action comes amid worries regarding Chinese supply chain problems. The number of chips coming from China has been restricted by the US.
According to a statement from Gina Raimondo, the secretary of commerce, “CHIPS for America is fundamentally a national security initiative, and these guardrails will help ensure malicious actors do not have access to cutting-edge technology that can be used against America and our allies,” as seen by Bloomberg.
Why It’s Important ?
According to the survey, China is the largest semiconductor market in the world, which can restrict the expansion of the aforementioned firms.
Companies that receive significant amounts of support from the federal government may be affected by the limits on capacity expansion in China.
Compared to 29% in 2021 and 26% in 2020, China accounted for 27% of Intel’s revenue in 2022. In 2022, Taiwan Semiconductor Manufacturing’s revenue from China represented 11% of its total revenue, down from 18% in 2020 and 10% in 2021.
Several semiconductor businesses need to increase their capacity and operations due to the need for more powerful chips in artificial intelligence, smartphones, and linked cars. The new federal funding limitations may force chipmakers to make difficult choices in the future.