The U.S. Department of Commerce has announced a new rule to restrict semiconductor subsidy recipients from expanding their manufacturing capacity in China. The rule is aimed at protecting national security and preventing the use of technology funded by the CHIPS and Science Act for malicious purposes against the U.S. and its allies. The rule prohibits the material expansion of semiconductor manufacturing capacity for advanced facilities in “foreign countries of concern” for 10 years from the date of award. Material expansion is defined as increasing production capacity by more than five percent, and the rule also limits the expansion of production capacity for legacy facilities beyond 10 percent. Initially, there was a proposed spending limit on investments in advanced capacity in China, but this limit has been removed due to concerns from chipmakers, including Samsung Electronics. South Korea’s Ministry of Trade, Industry, and Energy expects that this rule will guarantee normal business activities for South Korean firms that pose no security concerns. In a meeting with U.S. Deputy Secretary of Commerce Don Graves, South Korea’s Industry Minister requested that concerns among domestic chipmakers be addressed and Graves assured that the U.S. would do everything to ensure South Korean firms can continue their legitimate business.

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