Commerce Revises Chips Act Guardrails to Address ‘Confusion’ About Newly Built Fabs

The Commerce Department clarified this week that companies can’t use Chips Act funding to invest in certain new semiconductor facilities in China and other countries of concern, saying some companies may have thought the rules blocked only certain investments in existing facilities.

The change fixes the wording in the definition of “material expansion” that Commerce included as part of its final guardrails for recipients of Chips Act funding released in September (see 2309220035). That definition focused on blocking certain transactions involving the material expansion of “existing” semiconductor manufacturing facilities in countries of concern. Commerce said the word “existing” led to “confusion as to whether the construction of entirely new semiconductor fabrication facilities fell within the scope of the final rule” or applied to only facilities that have already been built.

In a final rule effective Dec. 28, the agency clarified that new facilities are included within the scope of the guardrails, saying it “made clear” in the preamble of the regulations “that the restrictions” were “intended to apply to the construction of a new facility.” Commerce also said companies “understood” that its expansion clawback provision -- which allows the agency to take back the full funding amount from a company that violates the material expansion clause -- “was meant to address the construction of new semiconductor facilities.”

Commerce noted that public comments on the guardrails didn’t “raise significant concerns with placing restrictions on the construction of new facilities.” Some commenters even suggested the definition of material expansion “be modified to clarify that it was triggered by new construction.”