US chip subsidy effort faces pushback over china issues

A series of amendments for a $190 billion U.S. Senate bill aimed at countering China’s technology challenge are in limbo after business groups protested proposals intended to ensure that none of the money finds its way to China or other U.S. rivals.

U.S. business’s future operations could be disrupted because of the new regulations or reviews of investments or deals in China. This includes semiconductors and medical equipment. The bilateral trade deficit has run more than $100 billion a year since 2002. Senators from both sides of the aisle want guardrails, such as mandatory security disclosures and interagency reviews to stop U.S. businesses from compromising national security by outsourcing critical technologies to China.

For high-tech research, the Senate bill authorizes $120 billion. It also has authorized another $54 billion to subsidize U.S. semiconductor production. For chip factories, it makes no distinction between foreign recipients and U.S.-based firms in determining who gets funds for U.S. facilities. A key goal of the funding is to bring the world’s most advanced chip plants to the US. Taiwan Semiconductor Manufacturing Co and Korea’s Samsung Electronics Co Ltd only have this technology to do that.

Florida Republican Senator Marco Rubio has proposed an amendment requiring U.S. national security officials to screen recipients. Another amendment from Democratic Senator Bob Casey and Republican Senator John Cornyn would require an interagency review of any U.S. investments in China. Casey said that if a company wants to offshore semiconductors to China, they need to know about it. One Senate aide cited fierce opposition to the Casey-Cornyn amendment from businesses and some Republicans, including Senator Mike Crapo.

The House of Representatives is planning its own version of a China bill and could add other provisions on chips funding as well. Derek Scissors, of the conservative American Enterprise Institute, who studies China and security issues, said that the companies should be forced to make a choice. He added that if they receive federal government money, they cannot expand their business in China from that point. This is the end and if they don’t like that, they should not take the federal money.