Intel, Taiwan Semiconductor Could Face Limits On Future Growth With New Federal Restrictions

Semiconductor companies could be under pressure with tighter restrictions being placed on companies operating in China.

What Happened: New restrictions coming from President Joe Biden's administration could limit the amount of federal money semiconductor companies receive if they have operations in China. The news comes after the CHIPS and Science Act was passed last year by Congress.

The CHIPS Act could limit output expansion for companies that win grants, according to the Commerce Department, as reported by Bloomberg.

New restrictions that are expected to be announced Tuesday will limit companies to $100,000 in spending on investments in China. The new restrictions will also limit federal funding to companies that operate in “countries of concern,” which also includes Russia.

The new regulations are also expected to ban semiconductors that receive U.S. federal funding from entering into joint research or licensing pacts with companies and countries of concern.

The Commerce Department list of companies of concern includes Huawei Technologies Co, SenseTime Group, Yangtze Memory Technologies and others, according to the report.

The move by the Biden administration comes as there are concerns over supply chain issues from China. The U.S. has sought to limit the amount of chips that are coming from China.

“CHIPS for America is fundamentally a national security initiative and these guardrails will help ensure malign actors do not have access to cutting-edge technology that can be used against America and our allies,” a statement from Commerce Secretary Gina Raimondo said, as seen by Bloomberg.

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Why It’s Important: The new restrictions could limit future growth of semiconductor companies like Intel Corporation INTC, Taiwan Semiconductor Manufacturing Company TSM and Samsung.

China is the leading semiconductor market in the world, according to the report, which could limit the growth of the companies mentioned.

The restrictions on expanding capacity in China if companies are in receipt of federal funding could impact those that receive large portions of revenue from China.

Intel saw 27% of its revenue come from China in 2022, compared to 29% in 2021 and 26% in 2020. Taiwan Semiconductor Manufacturing had 11% of its revenue come from China in 2022, compared to 10% in 2021 and 18% in 2020.

With artificial intelligence, smartphones and connected vehicles needing more advanced chips, many of the semiconductor companies need to expand their operations and capacity. The new federal funding restrictions could lead to tough decisions ahead for chipmakers. 

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Photo courtesy of Intel.