The recipients of grants through the U.S. CHIPS and Science Act will be prohibited from expanding their semiconductor manufacturing capacity in China by more than five percent.

The U.S. Department of Commerce on Tuesday unveiled the details of guardrails restricting the activity of funding recipients to prevent harm to U.S. national security, with violators subject to a total forfeiture of the funding allocation.

The new guardrails for the CHIPS Act prohibit significant transactions involving the "material expansion" of a company’s semiconductor manufacturing capacity for leading-edge and advanced facilities for ten years in foreign countries of concern, which include China and Russia.

The rule defines “material expansion” as an increase in a facility's production capacity.

The proposed rule limits the recipients' expansion of manufacturing capacity for advanced chips to five percent, while the figure for older tech is set at ten percent.

The pending announcement of the rule earlier drew concern from South Korea, with chips produced in China by domestic manufacturers Samsung Electronics and SK Hynix classified as high-tech semiconductors.