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The Biden administration next month will place new restrictions on U.S. shipments of semiconductor chips and chipmaking equipment to China, according to Reuters.

The Commerce Department will formalize new rules prohibiting the shipment of chipmaking equipment to Chinese factories that produce advanced semiconductors, Reuters reported, citing people familiar with the matter.

U.S. companies seeking to export the equipment must obtain a Commerce Department license.

Three U.S. companies — KLA Corp., Lam Research Corp., and Applied Materials Inc. — already operate under the restrictions as directed by the Commerce Department.

The Hill has reached out to the Commerce Department for comment.

Semiconductor chips power most electrical systems and machines, from appliances to computers, vehicles and modern weapons.

Over the summer, the U.S. passed the Chips and Science Act, seeking to increase America’s competitive with China in the semiconductor industry with $50 billion in funding for the industry.

Last month, as tensions soared between the U.S. and China over House Speaker Nancy Pelosi (D-Calif.)’s visit to Taiwan, the U.S. began restricting the export of high-end graphics computer chips to Russia, China and Hong Kong.

Chipmaking company Nvidia, based in California, said the U.S. began requiring a license to export chips that are better than or equal to its A100 graphics card to those three countries. A similar restriction was reportedly applied to the company Advanced Micro Devices.

According to Reuters, the Commerce Department will formalize the licensing rule for exporting the highly advanced semiconductor chips next month.

China has demanded the U.S. drop the requirement, which affects data centers, artificial intelligence systems and other equipment that requires highly advanced chips.

The U.S. was once responsible for producing 37 percent of global semiconductor chips, but is now responsible for just 12 percent of production, according to the White House.

The Commerce Department announced last week it was planning to spend about $28 billion of the newly approved funding for grants, subsidies and loans to boost domestic production of key computer chips.