U.S. News: Chip Companies Seek Looser Aid Limits --- Businesses warn that regulations undermine U.S. attempt to revive semiconductor industry.

"WASHINGTON -- Businesses are pressing the federal government to ease conditions on aid for the semiconductor industry, warning that proposed limits on a grant program and tax credit will make it harder for U.S. companies to compete with their Chinese counterparts and develop new technology.

The companies are trying to shape the implementation of last year's Chips and Science Act, which authorized tax credits and $53 billion of spending in a concerted government effort to use public funding to revive the U.S. semiconductor industry.

The money comes with strings attached, and the grants force companies taking U.S. funding to sharply limit further expansion in China. But China accounts for one-third of global chip sales and is a linchpin in the semiconductor supply chain. Companies and industry groups complained to the Commerce Department they would be hurt if the restrictions on future Chinese expansion, known as guardrails, are too tight.

"If implemented as written, the proposed guardrail rules will also place companies at a serious disadvantage relative to those that do not participate in the two programs, harming the U.S. semiconductor industry as a whole and contradicting the intention of the Chips Act," said the U.S.-China Business Council, which represents American companies doing business in China.

Among the harshest critics are the South Korean government and chip industry, highlighting the challenge the U.S. faces in mobilizing allies' support for its battle to limit China's technological advance.

The Korea Semiconductor Industry Association warned that certain provisions of the guardrail rules will "inhibit the robust U.S. investment intended by the Chips Act and otherwise create obstacles for multinational semiconductor producers."

The Treasury Department is also under pressure from companies to expand the scope of the tax credit for new investments by chip companies and suppliers.

After reviewing the government's first proposal, companies are now urging more expansive definitions that would reward some businesses beyond the large chip makers that operate the largest fabrication facilities.

The companies submitted comments as the Commerce and Treasury departments prepare to issue final regulations.

The Commerce Department wants to severely limit grant recipients' ability to expand production of advanced semiconductors in China, while allowing companies to continue operating existing facilities and expand plants primarily serving the local Chinese market.

The South Korean government wrote in its May 22 comment that the law "should not be implemented in a manner that imposes an unreasonable burden on companies investing in the U.S."

The Korea Semiconductor Industry Association asked the Commerce Department to refrain from requesting technical and confidential company information through the application process and to implement nondisclosure agreements, reflecting foreign companies' reluctance to share trade secrets with the U.S. government.

Taiwan Semiconductor Manufacturing Co., or TSMC, the world's largest maker of advanced chips that is investing $40 billion in two chip factories in Arizona, also sought revisions to several Commerce Department proposals, including easing limits on expansion of existing facilities in China.

"The department is reviewing the public comments, appreciates stakeholder input, and intends to finalize the rule later this year," a Commerce Department official said.

Meanwhile, semiconductor companies are urging the Treasury Department to loosen its proposed eligibility definitions for the tax-credit side of the chips initiative.

That credit subsidizes 25% of companies' investments in semiconductor manufacturing facilities or factories that make semiconductor manufacturing equipment. The law didn't precisely define those terms, and the government's proposed definitions are too narrow, companies contended. They argued for broader rules that would allow more suppliers and makers of semiconductive materials to qualify.

Wolfspeed, a North Carolina company that President Biden visited in March, makes the silicon carbide used as semiconductors in electric vehicles and other high-temperature or high-voltage uses. But the proposed regulations wouldn't let the company claim the credit for a $5 billion facility it has under construction, according to its comment letter.

A Treasury Department spokeswoman declined to comment." [1]

The Minister of Foreign Affairs of Lithuania, Mr. Gabrielius Landsbergis, should travel between the USA, Korea and Taiwan and spoil the air in such a way that all the semiconductor manufacturers of these countries refuse to work in China.

1. U.S. News: Chip Companies Seek Looser Aid Limits --- Businesses warn that regulations undermine U.S. attempt to revive semiconductor industry. Hayashi, Yuka; Rubin, Richard. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 27 May 2023: A.5.