U.S. Commerce Secretary Gina Raimondo said Tuesday the final version of the so-called guardrails that limit production expansion in China will be ready within a few weeks, alarming Korean chipmakers running factories in China.

The comment comes at a time when the U.S. government is concerned over the development of the 7-nanometer chip in Huawei’s new phone when China did not have access to U.S. chip technology and equipment.

The guardrails are part of the Chips and Science Act which prohibits chipmakers that have been subsidized by the U.S. government from expanding production capacity in China by no more than five percent over the next 10 years measured by input of wafers.

“The whole purpose of the Chips program is national security,” Raimando said in a Tuesday congressional hearing. “And so, we have to be absolutely vigilant that not a penny of this helps China to get ahead of us, and that none of these companies who receive our money do any research with China or investment in China that in any way undermines our own national security. … So very soon, it [the guardrails] will be out.”

Korean chipmakers are subject to the sanctions.

Samsung Electronics is building a $17 billion chip factory in Texas and has applied for U.S. subsidies, making it a direct target of the guardrail regulations. It is running a NAND flash chip factory in Xi’an which is responsible for 40 percent of the memory chip’s production.

SK hynix has not finalized its investment in the United States, but it is mulling over its location and said it will apply for the subsidy program afterward. It has plants in Wuxi which makes 96-layer and 144-layer NAND flashes as well as about 40 percent of its DRAM chips.

“Wafer input has increased twofold over the past 10 years in order to maintain profit, but limiting that to five percent means the business will be critically harmed,” said Hwang Cheol-seong, professor of materials and science engineering at Seoul National University.

Unless there is a breakthrough technology to maintain margin without having to increase the wafer input, Hwang said the five percent limit means to “stop doing business.”

Another uncertainty lies ahead of Samsung Electronics and SK hynix as their grace period on being prohibited of bringing advanced chip equipment to their Chinese facilities is to expire in less than a month.

In October, the Commerce Department announced a set of rules that mandate chipmakers to acquire approval from the U.S. government when exporting advanced chip-making equipment to their Chinese plants.

Samsung Electronics and SK hynix received a one-year waiver from the regulation considering their hefty investment in China.

The Commerce Department is apparently bothered by the latest 7-nanometer chip technology found in Huawei’s new smartphone, raising needs for tighter regulation against China.

“We don’t have any evidence that they can manufacture 7-nanometer at scale,” Raimondo said Tuesday at the hearing.

The U.S. government has opened a probe into how China could have developed the advanced chip without access to U.S. technologies.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]