New Chip EQUIP Act Bans Foreign-Made Semiconductor Gear for 10 Years in Federally Funded Projects

The new Chip Equipment Quality, Usefulness, and Integrity Protection Act of 2025 (Chip EQUIP Act) is straightforward: If a company takes federal cash to build or expand a semiconductor facility, they can’t use certain manufacturing equipment made by a “foreign entity of concern” for a full decade. This law amends the existing National Defense Authorization Act to beef up supply chain security by defining and restricting what kind of gear U.S. chipmakers can use when operating on the government’s dime.

The Fine Print: What’s Off-Limits?

This bill introduces two critical definitions. First, it clarifies that the restriction applies to equipment that is “Completed, fully assembled”—meaning it’s ready to install and use. This is important because the ban doesn’t apply to individual parts, chambers, or subsystems that might be incorporated into a larger machine; it targets the finished product itself. Second, the bill defines "Ineligible semiconductor manufacturing equipment" as any completed equipment (like lithography, etching, or testing gear) that is manufactured, assembled, or refurbished by a foreign entity of concern or its subsidiary. If you’re getting federal funding for a chip project, Section 2 says you are prohibited from procuring, installing, or using this ineligible equipment for 10 years after signing the funding agreement.

Think of it like this: If a major U.S. chip manufacturer receives a grant to build a new fabrication plant, they can’t use that grant money—or even use their own money on that specific project—to buy a finished, state-of-the-art etching machine from a company identified as a national security risk. This restriction is designed to ensure that the vital infrastructure of the U.S. semiconductor industry, particularly projects supported by taxpayer money, remains secure and independent from potential adversaries.

The National Security Tightrope: Waivers and Exceptions

The Chip EQUIP Act isn't an absolute, blanket ban. The Secretary has the power to grant a waiver under specific conditions, acknowledging the realities of the global supply chain. The most common exception is likely to be the “unavailability clause”: if the ineligible equipment cannot be produced in the U.S. or an allied country in sufficient quantity, satisfactory quality, or is not reasonably available, the Secretary can grant an exception. This is a crucial safety valve. If a U.S. company needs a highly specialized piece of gear that only the restricted foreign entity makes—and holding up production while waiting for a domestic alternative would hurt the U.S. supply chain—they can apply for a waiver.

Another waiver condition applies to refurbished equipment: if the equipment was originally manufactured by a non-foreign entity of concern, even if it was refurbished by a restricted entity, it might get a pass. Finally, the Secretary, after consulting with the Director of National Intelligence and the Secretary of Defense, can grant a waiver if they determine it is in the “national security interest” of the U.S. This last point introduces a medium level of vagueness. While necessary for flexibility, the “national security interest” determination gives high-level officials significant discretionary power to greenlight exceptions, which could be a point of friction down the line if the criteria aren't consistently applied.

Real-World Impact and Trade-offs

For companies receiving federal assistance, this bill forces a hard look at their supply chains. They must now ensure every piece of completed manufacturing equipment they use complies with these new rules for a decade. This benefits U.S. and allied equipment manufacturers, giving them a guaranteed market share within federally backed projects. The goal is to build a more resilient, secure domestic chip ecosystem.

However, the immediate challenge for covered entities is potential friction and cost. If a U.S. company relies heavily on a specific, highly efficient machine from a restricted foreign supplier, they will now have to pivot to a different supplier, which could mean higher costs, delays, or a temporary dip in production efficiency while they adjust to new machinery. This is the trade-off: security and independence at the expense of potential short-term convenience and efficiency. The 10-year restriction period underscores the seriousness of this commitment, making it a long-term strategic shift rather than a temporary measure.