Commerce Dept proposes rules to prevent foreign countries from using CHIPS Act technology

The Commerce DepartmentCommerce Department announced a proposed regulation that would prevent the use of technology developed out of the $52 billion CHIPS and Science Act against the U.S. or its allies.

The Commerce DepartmentCommerce Department must develop regulations in order to prevent companies from doing business with foreign countries that are affected by the bipartisan CHIPS Act last year, which was enacted by Congress last year. The bill names the People's Republic of China, Russia, Iran and North Korea as countries where funding recipients can't expand semiconductor manufacturing for 10 years.

Commerce Secretary Gina Raimondo said in a press release Tuesday that we plan to expand the technological and national security advantages of America and our allies because of the innovation and technology funded in the CHIPS Act.

Raimondo said that CHIPS for America was a national security initiative and that these guardrails will help ensure that malign actors don't have access to cutting-edge technology that can be used against America and our allies. We will continue to coordinate with our allies and partners to ensure that this program advances our shared goals, strengthens global supply chains, and enhances our collective security. Entities with incentives under the CHIPS Act can't engage in significant transactions above $100,000 to expand semiconductor manufacturing for lead-edge and advanced facilities in foreign countries of concern for 10 years after receiving the funds.

The law also prohibits recipients from engaging in joint research or technology licensing efforts with a foreign entity of concern if they are related to technology or a product that raises national security concerns.

Companies receiving CHIPS Act funding would have limited ability to expand existing legacy facilities in foreign countries of concern. Recipients would be disqualified from expanding a facility's production capacity beyond 10%.

The rule defines legacy chips as 85% of being incorporated into final products in the country where the facilities output is predominantly serving the domestic market of the foreign country of concern where the legacy chips are produced.

The Commerce DepartmentCommerce Department is seeking comments from the public on the proposed rule for 60 days, and feedback from industry, allies and partners is expected to inform the final rule later this year.