US to Block TSMC, Intel From Expanding Chip Production in China

The US Congress has passed a historic $52 billion federal programme that aims to boost chipmaking capabilities in the US.

According to the bill, companies that receive the funding have to promise not to increase their production of advanced chips in China.

The curbs are expected to hit leading chipmakers like Intel and Taiwan Semiconductor Manufacturing (TSMC) that have different facilities in China. The companies won’t be able to upgrade or expand their existing factories, effectively losing some growth opportunities in the world’s biggest semiconductor market.

Not all chips will be banned from production in China. The Chips and Science Act bars companies that get federal funding from materially expanding production of chips more advanced than 28-nanometers in China — or a country of concern like Russia — for 10 years.

28-nanometer chips are several generations behind the most cutting-edge semiconductors available now, but are still used in a wide range of products including cars and smartphones.

The federal subsidies are expected to go to Intel, TSMC and South Korea’s Samsung Electronics, all of which are now building new chip facilities in the US.

Among them, only TSMC is making relatively advanced chips in China currently, while Intel, which has been lobbying hard against the Act, ended up selling its wafer plant in Dalian to South Korea’s SK Hynix in late 2021. However, Intel still has chip packaging and testing facilities in China.