N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 1

CHIPS for America

Preventing the Improper Use of CHIPS Act Funding

Final Rule

September 22, 2023
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 2

AGENDA

• Purpose of national security guardrails

• Key parts of CHIPS Act related to national security guardrails

• Final Rule deep dive

• For any questions, please contact askchips@chips.gov
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 3

Today's Speakers

Morgan Dwyer

Chief Strategy 

Officer CHIPS Program 

Office

Vikram Viswanathan

Director of Policy 

CHIPS Program Office

Sophia Rubio

Public 

Engagement CHIPS 

Program Office
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 4

CHIPS for America Vision

Economic 

Security

The CHIPS Act will 

strengthen supply chain 

security and increase 

economic resilience in critical 

sectors.

National 

Security

The CHIPS Act will ensure 

that the U.S. can 

manufacture advanced 

technologies, including 

secure chips for the U.S. 

military.

Future 

Innovation

The CHIPS Act will spur 

innovation, increase 

competitiveness, and 

ensure long-term U.S. 

leadership in the sector.
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Funding Opportunities

February 28, 2023

For commercial 

leading-edge, current, 

and mature node 

fabrication facilities

June 23, 2023

For large 

semiconductor 

materials and 

equipment facility 

projects $300M+

For smaller 

semiconductor 

materials and 

equipment facility 

projects under $300M

To support the 

construction of 

semiconductor R&D 

facilities

The CHIPS Program Office has received over 500 statements of interest 

and 100 pre-applications and applications
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 6

Guardrails Rule Timeline

March 21, 2023

• The Department 

released Notice of 

Proposed Rulemaking 

and began accepting 

public comment

60-day comment period

• Closed May 22, 2023

• We received comments 

from industry, trade 

associations, labor, 

and government

September 22, 2023

• Release final rule 

implementing the 

guardrails
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 7

Preventing the Improper Use of CHIPS 

Act Funding

• The national security guardrails are intended to ensure that 

funding provided through this program does not directly or 

indirectly benefit foreign countries of concern. 

• Strong national security guardrails will help protect the national 

security of America and our partners and allies.

• We will continue coordinating with allies and partners to ensure 

these guardrails advance shared goals, strengthen global supply 

chains, and enhance our collective security.
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Final Rule Overview

• The Final Rule addresses two separate guardrails from the 

CHIPS Act: the expansion guardrail and the technology 

guardrail

• Both guardrails permit the Department to recover the entire 

award if violated.

• The final rule details how both guardrails will work and the 

process for evaluating and mitigating possible violations.
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The final rule... 

Establishes the scope of restrictions on expansion of semiconductor 1 manufacturing capacity in foreign countries of concern

Defines the scope of exceptions, including for facilities producing legacy 2 semiconductors

Details restrictions on joint research and technology licensing 

efforts 3

Details additional conditions to prevent circumvention of the technology 

clawback by entities related to the funding recipient 4

Expansion 

Guardrail

Technology 

Guardrail
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Significant Changes

• We appreciate the detailed comments we received, including from government 

entities, industry associations, and multinational semiconductor companies, and have 

made several significant changes in response to those thoughtful comments.

• The final rule ties expansion of semiconductor manufacturing capacity to the 

addition of cleanroom space, which allows for equipment upgrades and efficiency 

improvements within existing space. 

• The final rule includes several exceptions for the joint research and technology 

licensing clawback that are not a threat to national security, such as certain preexisting activities, activities related to international standards, and those involving 

patent licensing. 

• The final rule includes semiconductor wafer manufacturing within the definition of 

semiconductor manufacturing. 
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 11

Expansion Guardrail Final Rule Overview

• Companies receiving CHIPS funding, as well as members of their affiliated group, may 

not build new facilities or expand existing facilities in foreign countries of concern for 10 

years.

• To allow existing facilities to continue ordinary operations (such as tool upgrades 

and replacements), they may upgrade manufacturing capacity by 5%. 

• Existing facilities manufacturing legacy semiconductors are excepted; however, 

such a facility may not increase capacity by 10% or more.

• Existing facilities may upgrade their technology, but export controls may still apply.

• The exception for new legacy facilities that predominantly serve the country of concern 

requires that 85 percent of the final products containing the chips be used or consumed 

in that country.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 12

Expansion Guardrail

CHIPS Act

A covered entity and its affiliated group may not 

engage in any significant transaction involving the 

material expansion of semiconductor manufacturing 

capacity in a foreign country of concern for 10 

years following an award. Violations of this 

prohibition may trigger full claw back of the 

CHIPS award.

Exceptions:

• Existing facilities for producing legacy 

semiconductors

• Facilities for producing legacy semiconductors 

that predominantly serve the domestic market of 

the foreign country of concern.

Foreign country of concern

China, Russia, North Korea, Iran.

The Secretary may add other countries she 

determines to be engaged in conduct that is 

detrimental to the national security or foreign 

policy of the United States.

Affiliated group

The CHIPS Act defines affiliated group to 

generally mean an entity that has 80% common 

ownership with the covered entity.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 13

Expansion Guardrail Final Rule

CHIPS Act Final Rule

A covered entity and its affiliated group may not 

engage in any significant transaction involving the 

material expansion of semiconductor manufacturing 

capacity in a foreign country of concern for 10 

years following an award. Violations of this 

prohibition may trigger full claw back of the 

CHIPS award.

• Significant transaction: Will be defined in each individual award 

agreement.

• Material expansion: Increase in semiconductor manufacturing capacity 

by more than 5% through the addition of cleanroom, production line, or 

other physical space.

• Semiconductor manufacturing capacity: Wafer production, 

semiconductor fabrication, or packaging.

Exceptions:

• Existing facilities for producing legacy 

semiconductors

• Facilities for producing legacy 

semiconductors that predominantly serve 

the domestic market of the foreign country 

of concern.

• Existing facilities: A facility that was built, equipped, and operating 

prior to award or, at the Secretary’s discretion, a facility being equipped 

or expanded at the time of award. A facility that has undergone a 

significant renovation increasing capacity by 10% or more is no longer 

an existing facility.

• Legacy semiconductor: For logic, 28nm or older (from statute). For 

DRAM, half-pitch >18nm. For NAND, <128 layers. However, does not 

include any semiconductor packaged with 3D integration, post-FinFET

chip, or semiconductor critical to national security.

• Predominantly serves the market: At least 85% of a facility’s output is 

incorporated into final products that are used or consumed within the 

market.
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Technology Guardrail Final Rule Overview

Companies may not generally engage in joint research or technology licensing related 

to technology or products that the Secretary has determined raise national security 

concerns (i.e., certain export-controlled semiconductors or semiconductors critical to 

national security) with foreign entities of concern.

The final rule articulates those categories of technology or products that raise national 

security concerns. The Technology Guardrail does not apply to joint research or 

technology licensing that was ongoing prior to the issuance of the final rule. Such 

“grandfathered” activities must be memorialized in the agreement between the covered 

entity and the Department.

The final rule includes additional conditions to prevent circumvention of the Technology 

Guardrail.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 15

Technology Guardrail

CHIPS Act

A covered entity may not knowingly engage in any joint research or technology licensing effort with 

a foreign entity of concern that relates to a technology or product that raises national security concerns.

This prohibition does not apply to joint research or technology licensing that was ongoing prior 

to the issuance of the final rule.

Violations of this prohibition will result in the mandatory recovery of the entire CHIPS award.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 16

Technology Guardrail Final Rule

CHIPS Act Final Rule

A covered entity may not knowingly 

engage in any joint research or

technology licensing effort with a 

foreign entity of concern that relates to 

a technology or product that raises 

national security concerns. 

This prohibition does not apply to 

joint research or technology 

licensing that was ongoing prior to 

the issuance of the final rule.

Violations of this prohibition will 

result in the mandatory recovery of 

the entire CHIPS award.

• Applicable term: Defined in each award agreement.

• Joint research:Any R&D jointly undertaken by two or more people, including R&D 

undertaken as part of a joint venture. Exempts 5 categories, including standards 

work, engineering related to using a foundry, and warranty services.

• Technology licensing: An agreement to make trade secrets or know-how available 

to another party. Exempts the same categories above, as well as patent licensing.

• Foreign entity of concern: Includes entities on sanctions lists and adds BIS’s Entity 

List and Treasury’s Chinese Military-Industrial Complex Companies (NS-CMIC) list. 

The term also includes companies organized or with a principal place of business in 

a foreign country of concern as well as individuals resident in those countries.

• Technology or product that raises national security concerns:A semiconductor 

critical to national security or electronics which are export controlled for national 

security or regional stability reasons (including items controlled as part of the 

October 7 rules).

• Semiconductor critical to national security: Includes chips used for 

quantum computing, in radiation-intensive environments, and for other 

specialized military capabilities. The list was developed with input from DOD 

and the IC.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 17

Additional conditions on certain joint research 

or technology licensing

• The Technology Guardrail applies only to the covered entity and, if triggered, results in 

the mandatory recovery of the entire award. 

• To prevent circumvention of the Technology Guardrail, the final rule establishes that 

the Secretary may take appropriate remedial measures, where any related entity of a 

covered entity engages in joint research or technology licensing that would violate the 

Technology Guardrail if engaged in by the covered entity.

• A related entity is any entity that directly, or indirectly through one or more 

intermediaries, controls or is controlled by, or is under common control with, the 

covered entity. 

• Appropriate remedial measures include requiring a mitigation agreement, partial 

recovery of an award, and full recovery of an award.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 18

Coordinating with Allies and Partners

• The Department of Commerce has appreciated input from partners and allies while developing the 

guardrails.

• We will continue coordinating with allies and partners to support a healthy global semiconductor 

ecosystem that drives innovation and is resilient to cybersecurity threats, natural disasters, 

pandemics, geopolitical conflict, and more.

• As semiconductors and technologies continue to evolve, the U.S. will work with allies and partners 

to ensure the latest technology cannot be used by malign actors to undermine our collective 

economic and national security.

• We will continue coordinating closely with U.S. partners and allies to advance these shared goals, 

advance our collective security, and strengthen global supply chains.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 19

Question and Answers
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N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 20

Frequently Asked Questions

How will this affect companies with existing 

operations in foreign countries of concern? 

Will they still be able to apply?

The CHIPS Program Office strongly encourages applications from 

companies outside the United States. Companies with existing 

operations in foreign countries of concern may apply for and receive 

CHIPS funding. All funding recipients will be subject to our guardrails to 

protect national security. The guardrails were designed to prevent future 

investment in countries of concern, and to allow existing facilities to 

continue viably operating to avoid disrupting existing supply chains, 

consistent with any applicable U.S. export control regulations.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 21

N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 21

Frequently Asked Questions

Do the guardrails require CHIPS funding 

recipients to cease manufacturing in 

foreign countries of concern?

No, with some exceptions, the guardrails will not affect the existing 

operations of CHIPS funding recipients in foreign countries of 

concern. The rule allows for these facilities to continue operations and 

undergo reasonable upgrades consistent with any applicable U.S. export 

control regulations. The guardrails are focused on the expansion of 

semiconductor manufacturing capacity and joint research or technology 

efforts related to technology and products that raise national security 

concerns. The guardrails do not generally regulate all technology.
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 22

Next Steps

• Visit CHIPS.gov for resources to share, including:

• Notice of Funding Opportunity

• Vision for Success

• Applicant guides and templates

• Newly Released: National Security Guidebook

• FAQs and fact sheets

• Webinar schedule (and recordings of prior webinars)

• Join our mailing list

• Contact us

• askchips@chips.gov – general inquiries

• apply@chips.gov – application-related inquiries
N ational Institute of S tandar ds and Techno l o gy | U .S . Departm e n t of C ommerce 23

Thank you