U.S. Prohibits Receivers of CHIPS Subsidies From Building New Fabs in China

Semiconductor (Image credit: Shutterstock)

Now that the US Senate has passed the Chips and Science semiconductor production subsidies bill, it is likely only a matter of days before it will be passed by the House of Representatives and signed into law by the President, which will open doors for chipmakers to get subsidies and other incentives from the federal government. But while all producers of chips who build new fabs are eligible to get them, there are certain conditions they will have to meet. 

As it turns out from the text of the Chips and Science act, companies that receive Federal incentive funds are prohibited to expand or build "new manufacturing capacity for certain advanced semiconductors in specific countries that present a national security threat to the United States."  

While the bill does not clarify which manufacturing nodes it mentions, there are four countries that the U.S. intelligence considers a threat to national security: China, Iran, North Korea and Russia. Keeping in mind that no transnational chipmaker owns fabs in Iran, North Korea or Russia, it is evident that the legislators do not want recipients of the Chips fund to expand or build new semiconductor manufacturing capacity in China. As for exact nodes, considering that the U.S. Department of Commerce examining the possibility to make SMIC stop producing chips using its FinFET-based 14nm-class node, we may speculate that 14nm/16nm and newer technologies are considered advanced. 

Right now, GlobalFoundries, Intel, Samsung Foundry, TSMC and Texas Instruments are either building new fabs in the U.S. or are expanding their existing capacity and they are all eligible to get financial subsidies and incentives from the federal government as long as they meet the requirements. Micron last year said it was considering to establish new R&D facilities in the U.S. and potentially build a fab in the U.S. as part of its $150 billion R&D and CapEx spending plan over the next decade. 

There are two companies that are building new semiconductor fabrication facilities in the U.S. and happen to own fabs in China: TSMC and Samsung. 

Last month, TSMC disclosed plans to expand its Fab 14 in Nanjing, Jiangsu Province, China. TSMC's Fab 14 produces chips using TSMC's N28 and various N28-derived specialty fabrication processes, yet it is unclear whether 28nm-class nodes are considered as 'advanced' by the act.  

Samsung Semiconductor (which is technically not Samsung Foundry) produces 3D NAND and DRAM memory in Xi'an China and is constantly reviewing its capacities and nodes it uses at its China fabs based on demand. Samsung has not announced any significant expansions of its Xi'an fab, but to stay competitive it must adopt new fabrication process and their adoption may affect productivity of the facility. Meanwhile, it is also unclear whether the U.S. lawmakers consider DRAM and NAND technologies as "advanced" as well as adoption of new nodes to be an "expansion."

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • escksu
    Well, companies have to decide themselves if it's worth taking up this "subsidy" or not. The amount they are getting has to be at least enough to cover what they could potentially lose in the long run, else it won't be worth it.

    For those who has facilities in china, it may not be worth it for them.

    Btw, it's impossible to stop SMIC to stop it's 14nm or even 7nm production. The only thing US can do is to ban the company from exporting it's chips to US.
  • TCA_ChinChin
    I completely agree with this restriction since any country subsidizing an industry would expect not to have that money spent in another country so this is like the bare minimum companies should agree too. Although at this point, I feel like anything and everything the US is doing and could be doing is too little too late to stop SMIC or some other Chinese state owned enterprise.