The Strategist

US will restrict chipmakers from financing when expanding production in China

08/03/2022 - 10:33

$52 billion in funding for chip production was approved by the US Congress. According to Bloomberg, a condition of the federal grant program for increasing chip manufacture in the United States is that companies seeking the funding agree not to grow their production of sophisticated chips in China.

Leading chipmakers like Intel Corp. and Taiwan Semiconductor Manufacturing Co. (TSMC), who have attempted to expand their businesses in China, will be negatively impacted by the restrictions, the agency claims.

TSMC would effectively lose out on growth potential in the largest semiconductor market in the world, China, because it won't be able to significantly update or expand its current facilities. Particularly under the Chip and Scientific Development Act, businesses receiving federal support are not allowed to considerably increase their Chinese and Russian production of chips sophisticated more than 28-nanometer chips during a 10-year period.

Both memory cards and integrated circuits are prohibited. Companies may be allowed to produce outdated generations of chips in order to cater to a market that is primarily in China or another foreign nation. If recipients of the government assistance break the restriction, they might be obliged to repay them in full.