US-sponsored companies banned from expanding production in China

The US Congress passed the so-called Chip and Science Act (CHIP-plus), stimulating US semiconductor manufacturing industry to compete with China.

According to the document, Bloomberg reports that American tech giants financed by this program are prohibited from expanding production in China.

Microchips are used in a variety of electronics, including cars and smartphones. The new measure concerns the production of microchips smaller than 28 nanometers (nm), the most advanced technology. Companies receiving federal funding will not be able to expand their production for 10 years in China. Corporations that violate the restriction will have to repay federal subsidies fully.

It is expected that most of the grants will go to such large manufacturers as Intel, Taiwan Semiconductor Manufacturing (TSMC), and South Korean electronics giant Samsung. These corporations are now building new chip manufacturing facilities in the US. The White House supported the decision of Congress and is expected to sign the law soon.

Among potential grant recipients, only TSMC produces next-generation chips in China. His facility in Nanjing, southern China, makes 28nm and more advanced 16nm chips. However, once the law comes into effect, TSMC will not be able to modernize or expand its existing manufacturing facilities in Asia and will effectively lose growth opportunities in the world's largest semiconductor market, Taiwan, according to Bloomberg.