US tech firms that have received federal funding in the past will be prevented from creating advanced technology factories in China for at least a decade. The Biden administration has announced new guidelines as part of a $53 Billion plan to build up the US national semiconductor industry. The “brain” in every electronic device, from cars to household appliances, is predominantly manufactured in Asia, notably in Taiwan's sophisticated and immensely costly fabrication plants.
The US Chips and Science Act (Chips) is a US federal statute enacted by the 117th United States Congress and signed into law by President Joe Biden on August 9, 2022, it is part of the American response to a long-running technological dispute between Washington and Beijing, as US firms demand more government support to reduce reliance on components produced in Chinese factories. Business groups have pushed for more government support to reduce reliance on China.[1]
The CHIPS and Science Act will establish a technology, innovation, and partnerships directorate at the National Science Foundation (NSF) to focus on fields like semiconductors and advanced computing, advanced communications technology, advanced energy technologies, quantum information technologies, and biotechnology. It will strengthen the commercialization of research and technology, ensuring that what is invented in America is made in America. The Act will also reauthorize and expand fundamental and use-inspired research at the Department of Energy Office of Science and the National Institute of Standards and Technology to sustain US leadership in the sciences and engineering as the engine for American innovation.
Manufacturers are faced with a global microchip shortage which has slowed production. "We're going to be implementing the guardrails to ensure those who receive CHIPS funds cannot compromise national security, they're not allowed to use this money to invest in China, they can't develop leading-edge technologies in China, for a period of ten years," says the US Commerce Secretary, while explaining the US Chips and Science Act. "Companies who receive the money can only expand their mature node factories in China to serve the Chinese market."
The US and China are locked in a long-running dispute over trade and technology. In August 2022, US President signed a law committing $280 Billion to high-tech manufacturing and scientific research amid fears that the US is losing its technological edge to China.
The investments include tax breaks for companies that build computer chip manufacturing plants in the US. The US currently produces roughly 10% of the global supply of semiconductors, which are key to everything from cars to mobile phones, down from nearly 40% in 1990.
The Chinese Embassy in Washington had opposed the semiconductor bill, calling it reminiscent of a "Cold War mentality."
Some US chipmakers have already been affected by the effect of Washington's crackdown on selling US technology to China. Recently Nvidia and AMD were told by US officials to stop the sale of Artificial Intelligence chips to China. The Chips Act commits a total of $280 Billion to hi-tech manufacturing and research and is designed to increase the US’s competitiveness with China.
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[1] https://www.cybersecurityintelligence.com/blog/us-tech-firms-forbidden-to-manufacture-in-china-6503.html
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