While it’s known that the US government declared a massive grant of $52 billion for the chip-making companies, the funding includes a significant clause that restricts the granted companies’ growth.

As per the Chips and Science Act, where the funding is made to eligible companies, they’re barred from expanding any advanced chip production in China. Thus, companies like Intel and TSMC may be severely affected, considering their plants in China for advanced chip production.

A Significant Clause For Grantees

To reduce the reliance on China for production capacities, the US government has announced funding worth $52 billion to chip makers willing to produce them in the US.

While it’s yet to grant, potential recipients include Intel, Samsung Electronics, and TSMC, which are already building new chip fabrication plants in the US. Though they’re subject to getting this grant, the offer includes a clause that bars them from expanding in certain countries!

According to the Chips and Science Act, any company receiving federal funding should not materially expand their chip production (of more advanced than 28nm) in China and other countries of concern like Russia for 10 years! This shall bar Intel and TSMC from expanding their production in China – the most lucrative productive area.

Although, they’re barred only from making the advanced chips – greater than 28nm – which aren’t used in highly competitive segments like smartphones or computers. But, 28nm chips are still in the wild, mostly in cars and budget phones that are less dynamic.

And the companies failing to fulfill this clause should be forced to pay back their federal subsidies in full. The White House is expected to sign the Act shortly and has already supported this measure.

The US government has been tight on China, as it had cut off the supply of advanced tools and software to Chinese chip-making giant – Semiconductor Manufacturing International Corp – which fell back in competition against the current vendors.


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