The Biden administration has said that US tech businesses that receive government money would be prohibited for ten years from constructing “advanced technology” facilities in China.
The policies were revealed as part of a $50 billion (£43 billion) initiative to expand the domestic semiconductor sector.
It occurs at a time when industry associations have lobbied for further government assistance in an attempt to lessen dependence on China.
Due to a worldwide scarcity of microchips, output has stalled.
According to US Commerce Secretary Gina Raimondo, the US Chips and Science Act will be put into place “guardrails to ensure those who receive CHIPS funds cannot compromise national security… they’re not allowed to use this money to invest in China, they can’t develop cutting-edge technologies in China… for a period of ten years.”
The recipients of the funds may only increase the size of their mature node plants in China in order to meet Chinese demand.
The US and China are embroiled in a protracted trade and technological conflict.
A measure devoting $280 billion (£232 billion) to high-tech industry and scientific research was signed by US President Joe Biden in August amid worries that China is eroding the US’s technical advantage.
Tax incentives are included in the investments for businesses constructing computer chip manufacturing facilities in the US.
Since 1990, the US has decreased its production of semiconductors, which are essential to everything from vehicles to mobile phones, from over 40% to around 10% of the world supply.
The semiconductor law was opposed by the Chinese Embassy in Washington, which said it was reminiscent of a “Cold War mindset.”
The consequences of Washington’s restrictions on the export of US technology to China are already being felt by certain US chipmakers. US authorities ordered Nvidia and AMD earlier this month to halt selling artificial intelligence processors to China.
The limitations, according to Dan Ives of Wedbush Securities, are a “gut blow” for Nvidia.
According to Mr. Ives, who spoke to the BBC, “This is truly a shot across the bow at China and it’s really going to feed those fires in terms of geopolitical (tensions)”.