Chipmakers receiving taxpayer subsidies under new law can resume business in China after 10 years

Some lawmakers were concerned that large companies like Intel could receive federal funding and still expand chipmaking operations in China.

Updated: September 8, 2022 - 11:47pm

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Chipmaking companies that receive U.S. taxpayer funding under the $280 billion CHIPS Act of 2022 will be able to do business with foreign countries like China after a 10-year waiting period, according to guidelines released by the U.S. Department of Commerce on Tuesday.

The legislation that President Biden signed last month was designed to build a domestic supply chain for computer chips, used for electronic devices and vehicle technology, as a way to reduce reliance on other countries like China and Taiwan.

The Commerce Department reported that "over two-thirds of the most advanced semiconductors are made in Taiwan, and since 2020, nearly 75% of new capacity for certain mature nodes has been added in the People's Republic of China (PRC)."

According to the new guidelines for the distribution of more than $50 billion for chipmakers under the legislation, "any company that receives funding will be prohibited for 10 years from engaging in significant transactions involving the material expansion of semiconductor manufacturing capacity in PRC or other countries of concern, subject to limited exceptions authorized in law."

Commerce Secretary Gina Raimondo said at the White House on Tuesday that the companies that receive CHIP funds can still expand "known factories in China to serve the Chinese market."

Some lawmakers, like Florida Republican Sen. Rick Scott, had expressed concerns that large companies like Intel could receive federal funding under the legislation and still expand operations in China.

"We give them a tax deduction for building something, and we give them a tax credit for building something," Scott told Just the News in July. "What does the taxpayer in this country get? Why don't we do something that actually guarantees that we're going to produce [the chips] here? And why can these companies still produce in China? And when China invades Taiwan, why don't they have to stop doing business in China?"

Some policy experts feared the taxpayer funds for qualified companies in the CHIPS bill would subsidize chipmaking operations in China.

“The answer to the CCP’s malevolent ambitions is not spending billions of dollars to help Fortune 500 companies, with no guarantee those dollars won’t end up supporting these companies’ business operations in China,” said Kevin Roberts, president of the Heritage Foundation. 

During the congressional debate over the legislation, Intel was reportedly lobbying Congress against attaching strict guardrails to the funding. According to Forbes, "the biggest point of contention" was related to China, specifically, "the restrictions on investing in China that will apply to companies that receive CHIPS Act money."

In the end, the ban on companies that receive the funding from conducting business with China was not permanent. 

According to the "strategy" document for implementation of the law, the CHIPS program office will "prioritize applicants" for the federal funding "with well-developed proposals designed to increase participation of and outreach to economically disadvantaged individuals, minority-owned businesses, veteran-owned businesses, women-owned businesses, and rural businesses in the geographic area of each project."

"We will evaluate each application one at a time," said Raimondo. "This is not a blank check for companies. This is not for them to pad their bottom line."

She also said CHIPS funds cannot be used for stock buybacks or to "replace private capital."

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