US awards $1.5 billion to chipmaker GlobalFoundries

The Biden administration on Monday announced a $1.5 billion award to New York-based chipmaker GlobalFoundries, one of the first significant grants from a government program aimed at revitalizing semiconductor manufacturing in the United States.

As part of the plan to strengthen GlobalFoundries, the administration will also provide an additional $1.6 billion in federal loans. The grants are expected to triple the company's production capacity in New York State in ten years.

The funding represents an effort by the Biden administration and lawmakers from both parties to revive U.S. semiconductor manufacturing. Currently, only 12 percent of chips are made in the United States, while the majority are produced in Asia. America's dependence on foreign sources of chips became an issue early in the pandemic, when automakers and other manufacturers had to delay or halt production due to a shortage of critical chips.

The award to GlobalFoundries will help the company expand its existing factory in Malta, New York, allowing it to fulfill a contract with General Motors to ensure dedicated chip production for its cars.

It will also help GlobalFoundries build a new factory to produce critical chips not currently made in the United States. This also includes a new class of semiconductors that are suitable for use in satellites because they can survive high radiation doses.

The money will also be used to upgrade the company's operations in Vermont, creating the first U.S. facility that can produce a type of chip used in electric vehicles, the power grid and 5G and 6G smartphones. If not for the investment, state officials said the Vermont facility would have faced closure.

The plans are part of the Biden administration's efforts to revive U.S. semiconductor manufacturing after many factories moved to East Asia in recent decades.

A global chip shortage during the pandemic led to closures, layoffs and furloughs at U.S. auto factories, slowing the U.S. economy and sending prices for used and new cars soaring. That encouraged Congress to pass a bill that would award more than $50 billion to the semiconductor industry, including $39 billion in subsidies and $11 billion for research and development distributed by the Commerce Department.

Gina Raimondo, the Commerce Secretary, said on Sunday that the award to GlobalFoundries would help secure a stable supply of chips for key auto suppliers and manufacturers and avoid hiccups in the supply chain.

“Today's announcement will ensure this doesn't happen again,” Ms. Raimondo said.

Senator Chuck Schumer of New York, the majority leader who strongly supported the legislation, said the government funding would allow GlobalFoundries to invest more than $12 billion in the United States and create 9,000 construction jobs and 1,500 permanent jobs in the manufacturing industry. create production.

“The bang for your buck that the federal government is investing is tremendous,” Schumer said. and added: “This shows that our best days are not over yet. We can compete.”

GlobalFoundries will also receive the first government grant issued specifically for workforce development, officials said. The government will donate $10 million to support a more than $60 million investment by the company to train new workers for the semiconductor industry. A lack of skilled workers is an often cited problem for chip makers trying to operate in the United States.

Officials emphasized that the announcement was only a preliminary agreement and that the company would be subject to a period of due diligence, including achieving certain construction and production milestones. The government will distribute funding once these benchmarks are met.

The award for GlobalFoundries comes as the company, like many others in the industry, has experienced lower revenues due to reduced demand from many key customers. Thomas Caufield, the CEO, expressed hope that the government would also take steps to boost demand for chips and encourage companies to shift some production to U.S. factories.

“Now that they're saying we're moving this money forward, I think the pressure will increase to reshore more products,” he said in an interview.

GlobalFoundries is one of the few large-scale companies that build chips for other companies that design and market them, a business known in the industry as a foundry.

The company was created from the former operations of Advanced Micro Devices, which the company spun off in 2009 and began focusing on designing rather than manufacturing chips. The financing was provided by Mubadala, an Abu Dhabi sovereign wealth fund that still holds a controlling stake.

GlobalFoundries opened a new factory in Malta, NY, in 2012 and acquired former IBM operations, including two factories, in 2014. Both had an important side business making specialized chips for the Pentagon; The Vermont plant in particular is known for making radio chips used in most smartphones and military hardware.

As part of a major strategy change, GlobalFoundries decided in 2018 to end the costly practice of developing new manufacturing processes that put more transistors on each piece of silicon. It chose to specialize in older manufacturing technology to make chips needed for cars, consumer devices and industrial and defense applications.

Biden officials have emphasized that they singled out GlobalFoundries because it produces older chips made with older manufacturing processes. Chips made using such technologies tend to be relatively cheap, but are at the heart of cars and consumer electronics that caused major disruptions during the pandemic-induced chip shortage. They are also widely used in defense applications.

The other companies selected for the first two government grants also used such advanced technology.

Chinese companies are currently strengthening their capabilities to play a much bigger role in supplying such older chips. The trend has alarmed the Biden administration and some members of Congress, who worry that cheap imports from China could undermine new U.S. factories.

So far, the government has not announced awards for companies making more advanced chips, although this is expected to happen in the coming weeks and months. Such chips provide calculations in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware.