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The U.S.'s landmark $52 billion federal program to boost domestic chipmaking capabilities has a caveat for companies like Intel Corp (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM), striving to build their businesses in China, Bloomberg reports.
Specifically, the Chips and Science Act bars companies procuring federal funding from materially expanding production of chips more advanced than 28-nm in China or a country of concern like Russia for ten years.
Companies vying for funding cannot increase their production of advanced chips in China.
Intel, TSMC, and Samsung Electronics Co, Ltd (OTC:SSNLF), all of which are now building new chip fabrication facilities worth tens of billions in the U.S., are the frontrunners for a sizable chunk of the grant.
However, TSMC's inability to upgrade or expand its existing facilities will cost it growth opportunities in the leading semiconductor market.
The U.S. has allowed the chipmakers to add production of 28-nanometer semiconductors or older generations.
Intel had to sell its wafer plant in Dalian to SK Hynix (OTC:HXSCL) as part of a broader deal for its Nand memory business. Intel still has chip packaging and testing facilities in China.
The U.S. restricted China's leading chipmaker, Semiconductor Manufacturing International Corp, access to ASML Holding NV's (NASDAQ:ASML) cutting-edge ultraviolet lithography systems.
The Chinese chip industry encountered a further setback as the U.S. tightened China's access to relatively advanced chip equipment.
The U.S. weighed restricting access of its chipmaking equipment to memory chip makers in China, including Yangtze Memory Technologies Co Ltd.
The move would also seek to protect the only U.S. memory chip producers, Western Digital Corp (NASDAQ: WDC) and Micron Technology Inc (NASDAQ: MU), jointly representing 25% of the NAND chips market.
Price Action: INTC shares traded lower by 0.97% at $36.60 premarket on the last check Tuesday.
Photo by mohamed hassan via Pxhere
