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The Biden administration has announced that US tech companies that receive government funding will be barred from building “advanced technology facilities” in China for a decade.
The requirements are part of the US government’s nearly $53bn (£46bn) plan to make semiconductor chips – the “brains” in every electronic device from cars to appliances – largely produced in Asia.
The U.S. Chips and Science Act (CHIPS), passed by Congress in August, is part of the U.S. response to the long-running technology dispute between Washington and Beijing, as U.S. companies seek more government support to reduce their reliance on components manufactured in Chinese factories.
The U.S. Commerce Department said it hopes to begin seeking applications next February for $39 billion in government semiconductor subsidies to build new manufacturing facilities in the U.S. The plan provides a 25% investment tax credit for chip plants whose construction begins in 2023.
“We will implement safeguards to ensure that those receiving CHIPS funds cannot harm national security,” said US Commerce Secretary Gina Raimondo. “They are not allowed to use this money to invest in China; They cannot develop leading technologies in China; You cannot export new technologies overseas.
The US currently produces only about 10% of the world’s semiconductor supply. Most of the chips are produced in factories in Taiwan and South Korea.
A global shortage of computer chips caused by the coronavirus pandemic has caused major production delays for car manufacturers in the UK and beyond, as well as technology companies and other manufacturers.
In addition, the industry gained geopolitical prominence as China began to witness threats on the world stage, including threats to Taiwan by President Xi Jinping.
This led to semiconductor production in the US as well as investment and expansion in Japan and the European Union.
“These funds are to help companies scale up their projects. We push companies to grow and be bolder,” Raimondo said. “We will discuss these deals one by one,” adding that companies receiving government funds “must make sure the money is absolutely necessary to make these investments.”
The CHIPS Act would spend a total of $280 billion on high-tech manufacturing and research and is designed to boost America’s competitiveness with China.
China’s embassy in Washington has previously protested the law as reminiscent of “Cold War mentality”.
The United States has begun to crack down on technology sales to China, with U.S. chip designer Nvidia last week telling U.S. officials to stop sending two major computing chips to China for artificial intelligence work.
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