The US Department of Commerce introduced on Tuesday the proposal of new guardrails that would prohibit federally-funded chip makers from expanding output by 5% for advanced chips and by 10% for older technology overseas.

"The US Department of Commerce today released a Notice of Proposed Rulemaking for the guardrails included in the CHIPS Incentives Program to advance America’s technological and national security," a statement published on the chips.gov reads.

"The national security guardrails are intended to ensure technology and innovation funded by the CHIPS and Science Act is not used for malign purposes by adversarial countries against the United States or its allies and partners," it added.

According to the statement, the new guardrail would prohibit "significant transactions involving the material expansion of semiconductor manufacturing capacity for leading-edge and advanced facilities in foreign countries of concern for 10 years from the date of award to stop recipients from constructing new or expanding existing leading-edge and advanced technology facilities in those countries."

"Today’s proposed rule defines significant transactions based on a monetary level of $100,000 and defines material expansion as increasing a facility's production capacity by five percent," it added.

In other words, firms that expand their output by 5% for advanced chips or by 10% for older technologies will have their awards retracted. 

It would also impose a $100,000 cap on semiconductor manufacturers investing in furthering the capacities of advanced chips.

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The new guardrails, which have a life expectancy of 10 years, are designed to keep a close watch over leading semiconductor manufacturers such as Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel, all of which have operations in China.

Grant recipients would still have the capacity to upgrade technology at their existing facilities if they secure the required export control licenses.

They will however be barred from conducting "joint research or technology licensing efforts with a foreign entity of concern that relates to a technology or product that raises national security concerns," the statement says.

A public consultation will run for 60 days, the statement adds, noting that industry, partners and allies, and interested parties will engage in submitting comments.

The final rule is scheduled to be published later this year. 

CHIPS is fundamentally a national security initiative.

That’s why the law included guardrails to protect our national security.

Today, we’re building on them to ensure malign actors don’t have access to cutting-edge technology that can be used against America and our allies. pic.twitter.com/olzJK4Nv0I

— Secretary Gina Raimondo (@SecRaimondo) March 21, 2023

In October 2022, the US Department of Commerce introduced sanctions on China, putting hurdles in Beijing's way to buy or develop advanced semiconductors. 

China responded by filing a case with the World Trade Organization (WTO), hitting back at US export sanctions on microchips, further fueling the tech war between the two countries.

Earlier this month, China accused Biden's administration of ramping up tensions toward Beijing following targeted unilateral sanctions against Chinese companies, by adopting restrictions to limit the Asian giant's access to some technologies and pressuring other countries to do so.

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