Commerce Department finalizes rule on national security ‘guardrails’ for CHIPS funding

Written by ABC AUDIO on September 22, 2023

(WASHINGTON) — The Commerce Department finalized the national security “guardrails” in which recipients who receive CHIPS and Science Act funding must abide by.

The CHIPS and Science Act was passed last year to address the manufacturing of semiconductors in the United States and the Commerce Department is responsible for dolling out billions of dollars to those who apply for the federal funding.

The rule filed on Friday explicitly states that companies who receive CHIPS money cannot expand semiconductor manufacturing in “countries of concern.”

“The statute prohibits the material expansion of semiconductor manufacturing capacity for leading-edge and advanced facilities in foreign countries of concern for 10 years from the date of award,” according to a press release from the Department of Commerce.

Companies that receive money and are already operating in “countries of concern” may not expand in that country for at least 10 years according to the rule.

The rule also classifies semiconductors as “critical” to national security.

“While the statute allows companies to expand production of legacy chips in foreign countries of concern in limited circumstances, today’s rule classifies a list of semiconductors as critical to national security, thereby subjecting them to tighter restrictions,” the release says.

“This designation covers chips that have unique properties that are critical to U.S. national security needs, including current-generation and mature-node chips used for quantum computing, in radiation-intensive environments, and for other specialized military capabilities.”

The list of those CHIPS were done in consultation with the Department of Defense and Intelligence community.

Companies that receive money and violate the rule will be subject to having the federal funding pulled, according to the Commerce Department.

“One of the Biden-Harris Administration’s top priorities – made possible by the CHIPS and Science Act – is to expand the technological leadership of the U.S. and our allies and partners. These guardrails will protect our national security and help the United States stay ahead for decades to come,” said Secretary of Commerce Gina Raimondo.

“CHIPS for America is fundamentally a national security initiative and these guardrails will help ensure companies receiving U.S. Government funds do not undermine our national security as we continue to coordinate with our allies and partners to strengthen global supply chains and enhance our collective security” Raimondo continued.

The Commerce Department received more than 500 statements of interest for CHIPS projects across 42 states, according to a Commerce Department official.

The Department has also received 100 pre-applications and full applications, according to a DOC official.