New US law bars tech firms receiving govt incentives from adding 'advanced' facilities in China for 10 years

The United States has published new guidelines that bar tech companies that receive government funding and incentives in the country from building "advanced tech facilities" in China for 10 years — in a bid to ramp up the US' local semiconductor manufacturing industry. The move falls under the country's CHIPS and Science Act, signed by President Joe Biden's present administration on August 9 this year, and seeks to restrict the influence that China can have on the supply of semiconductor chips required to power advanced technological platforms such as cloud computing, supercomputers, defense applications and the likes.

The US has laid out a $53 billion plan to grow its domestic semiconductor manufacturing industry, which falls under the erstwhile US government's planned $280 billion outlay under the CHIPS and Science Act, 2022. Under the latter, the country plans to attract the likes of Samsung Semiconductor and Taiwan Semiconductor Manufacturing Co. to set up facilities in the US, which are two of the biggest semiconductor manufacturing firms in the world.

Wednesday's barring of advanced tech firms such as Nvidia and Advanced Micro Devices (AMD), which were incidentally hit by an export ban of advanced chip designs used in various artificial intelligence applications to China earlier this month, would now see the companies being required to stop adding to their facilities in China — and seek to diversify their supply chain by building new facilities in the United States itself.

A report on the matter by The Guardian, which cites an official from the Biden administration, states that the US Department of Commerce expects to start accepting applications from technology firms to set-up such advanced tech facilities locally, while being prevented from expanding their manufacturing and assembly facilities in China.

Earlier last month, the US also banned companies from exporting the technology design of 3 nanometer chips — which fall under the advanced tech purview as well — to China, without mentioning the latter explicitly.

As the US seeks to diversify its supply chain, the Union government has offered a production-linked incentive (PLI) scheme of ₹76,000 crore to attract semiconductor design, assembly and packaging companies in the country. Various aspects of the scheme, which includes manufacturing of displays in India, are expected to bring new facilities to the country. In July this year, the Ministry of Electronics and Information Technology (Meity) said that it has received 23 applications for the semiconductor PLI in the country.

Alternate destinations, including the US and India, could help diversify semiconductor supplies for global firms — which are so far largely sourced from Taiwan, Korea and China.