By Kate Yuan

(JW Insights) Mar 22 -- The U.S. CHIPS and Science Act will limit chip production capacity growth in China to 5% over 10 years, providing some relief to Samsung Electronics and SK hynix that currently have manufacturing facilities in China, South Korea’s Yonhap News Agency reported on March 22.

It was earlier feared that the CHIPS Act may limit the South Korean companies from producing new and more advanced semiconductors in China.

"It seems we may have avoided the worst case," a related company official said.

Seoul's industry ministry said in a release that "Our companies will be able to maintain and expand, at least partially, manufacturing facilities in China. They will still be able to make technology updates to existing facilities."

The proposed regulations limit to 5 percent the expansion of semiconductor manufacturing capacity in foreign countries of concern for companies that receive funds under the new act, the U.S. Department of Commerce has announced.

"The statute prohibits significant transactions involving the material expansion of semiconductor manufacturing capacity for leading-edge and advanced facilities in foreign countries of concern for 10 years, and defines significant transactions based on a monetary level of $100,000," said a related regulation announced by the US on March 21.

The act offers up to $52.7 billion in subsidies to chipmakers that invest in new production facilities in the U.S., but prohibits "significant" expansion of manufacturing capacity of recipients in the named foreign countries of concern.

The proposed regulations allow the U.S. government to claw back the "entire funding" awarded to any recipient that violates the 10-year, 5-percent expansion limit.

Seoul's industry ministry said on March 22 that U.S. officials will visit South Korea this week for talks on details of the guardrails, as the two nations will continue close consultations before final regulations will be published later this year, according to the Yonhap report.