The US imposes a ten-year prohibition on “advanced tech” companies establishing operations in China.
The Biden administration has stated that US tech companies that receive federal money will be prohibited for ten years from constructing “advanced technology” facilities in China. The policies were revealed as part of a $50 billion (£43 billion) initiative to expand the domestic semiconductor industry.
It occurs at a time when industry associations have lobbied for further government assistance to lessen reliance on China. Due to a global shortage of microchips, output has stalled. The US government’s over $53 billion (£46 billion) plan to increase the production of semiconductors, the “brain” of every electronic device, from cars to home appliances, calls for the criteria. These chips are primarily made in Asia. As US businesses desire more government support to lessen reliance on components made in Chinese factories, the US Chips and Science Act (Chips), which was enacted by Congress in August, is a component of the American reaction to a protracted technology conflict between Washington and Beijing. The US Department of Commerce stated that it wanted to start soliciting applications for the $39 billion in government subsidies for semiconductors by next February to construct new production facilities in the US. A 25% investment tax credit will also be provided by the plan for chip plants, whose construction will start in 2023. According to Gina Raimondo, US Commerce Secretary, The US will put in place the guardrails to make sure that those who receive CHIPS funds cannot compromise national security. They’re not allowed to use this money to invest in China and develop cutting-edge technologies in China for a period of ten years. The US and China businesses are embroiled in a protracted trade and technological conflict.
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A measure devoting $280 billion (£232 billion) to high-tech companies and industry and scientific research was signed by US President Joe Biden in August amid worries that China is eroding the US’s technological advantage.
Tax incentives are included in the investments for businesses constructing computer chip manufacturing facilities in the US. Since 1990, the US has decreased its production of semiconductors, which are essential to everything from cars to mobile phones, from over 40% to about 10% of the global supply. Only 10% of the world’s semiconductor supply is presently produced in the US; the majority of chips are made at plants in Taiwan and South Korea. The coronavirus pandemic-related global shortage of computer chips has significantly slowed down production for carmakers in the UK and elsewhere, as well as for tech companies and other industries. The Chinese Embassy in Washington has voiced opposition to the semiconductor bill, saying it was reminiscent of a “Cold War mentality.” Additionally, the industry has grown in geopolitical importance as China has started to make its presence felt on the international stage under the leadership of President Xi Jinping, especially by threatening Taiwan. In the US, as well as in Japan and the EU, this has encouraged investment in and an increase in the production of semiconductors. The impact of Washington’s restrictions on US technology sales to China is already being felt by some US chipmakers. US authorities ordered Nvidia and AMD to halt selling AI chips to China earlier this month. The limitations were described as a “gut punch” for Nvidia by Dan Ives of Wedbush Securities.
Mr. Ives had told the BBC that “this is truly a shot across the bow at China and it’s really going to stoke the flames in terms of geopolitical (tensions)”. The US crackdown on the transfer of technology to China has already started to have an effect. Last week, US chip designer Nvidia said that US officials had ordered it to halt shipping two of its top processing processors to China for use in artificial intelligence projects.
