Congress is giving billions to the chip industry. Strings are attached.

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Disruptions in the supply chains for essential goods during the pandemic have added to the sense of urgency to stop American manufacturing from flowing overseas.

Intel told Commerce Department officials that it was considering expanding its manufacturing capacity for chips by taking over an abandoned factory in Chengdu, China. The new facility, the company said, could help ease a global chip crunch that was shuttering car and electronics factories and beginning to fuel inflation.

With concerns growing about China’s economic and technological ambitions, the bill includes strict new guardrails for firms considering expanding into China. Chip manufacturers that want to take U.S. funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade — unless they are producing lower-tech “legacy chips” destined only to serve the local market.

Raimondo’s department also has the authority to review future company investments in China and to claw back funds from any firm that it deems to have broken its rules, as well as the ability to make certain updates to the rules for foreign investment as time goes by. Sen. Todd Young, R-Ind., one of the bill’s key architects in the Senate, called it “an important sea change in our public policies.”

While Intel declined to say why it had opted not to invest in China, Bruce Andrews, the firm’s chief government affairs officer, said the company had made a historic commitment to invest in the United States and had a light manufacturing footprint in China. The incident with the Biden administration was reported earlier by Bloomberg.

 

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