The rules apply to a $39 billion fund under the Chips and Science Act signed into law last year, and with the Commerce Department's Chips Program Office soon seeking applications for this financing.
The United States will be "implementing a number of safeguards" to ensure that recipients are making progress towards meeting the country's national security goals, said Commerce Secretary Gina Raimondo.
"Recipients will be required to enter into an agreement restricting their ability to expand semiconductor manufacturing capacity in foreign countries of concern for a period of 10 years after taking the money," she added.
While she did not mention China by name, the Chips Act defines these countries of concern as including China, North Korea, Iran and Russia.
Raimondo added in a call with reporters that the goal is to make sure the United States is the only country in the world where every company able to produce leading-edge chips will be doing that at scale.
President Joe Biden's signature Chips Act earmarks almost $53 billion for the US semiconductor industry, a sector where cutting-edge production is mostly in Asia.
Meanwhile, the United States has tightened chip export controls to China, complicating Beijing's push to further its own semiconductor industry and develop advanced military systems.
Among other restrictions that recipients of the federal funding must adhere to include not using the financing for dividends or stock buybacks.
Applicants asking for more than $150 million in funding must also provide a plan for access to affordable and reliable child care for facility and construction workers.
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