US awards chip supplier $162 million to strengthen critical industries
The Biden administration on Thursday announced plans to provide $162 million in federal grants to Microchip Technology, an Arizona-based semiconductor company that supplies the automotive, defense and other industries.
The deal is the second to be announced under a new program aimed at ensuring U.S. companies that rely on semiconductors have a stable supply. Last month, the Biden administration announced a $35 million grant for BAE Systems, a defense contractor.
The investment will enable Microchip to increase production of semiconductors used in automobiles, aircraft, appliances, medical devices and military products. The government said it expected the award to create more than 700 jobs in construction and manufacturing.
“Today’s announcement with Microchip is a meaningful step in our efforts to strengthen the supply chain for legacy semiconductors, found in everything from cars to washing machines and rockets,” Commerce Secretary Gina M. Raimondo said in a statement.
Microchip plans to use $90 million to modernize and expand a factory in Colorado Springs and $72 million to expand a factory in Gresham, Oregon. The government said the funding would help Microchip triple production at the two sites and reduce the company’s dependence on foreign facilities. to help make its products.
The company’s chips are not advanced, but they are an important part of virtually every military and space program. Microchip is one of the largest suppliers of semiconductors to the defense industrial base and a designated trusted foundry for the military. It also plays a crucial role in industries important to the national economy, U.S. officials said.
That role became more apparent during the pandemic, when a global chip shortage put domestic suppliers like Microchip in the spotlight. With foreign chip factories shuttered to contain the virus, automakers and other companies scrambled to safeguard supplies. As a result, demand for Microchip’s products soared.
These shortages also helped motivate lawmakers to craft a funding bill aimed at supporting U.S. manufacturing and reducing dependence on foreign chips. The CHIPS and Science Act of 2022 gave the Commerce Department $53 billion to invest in the semiconductor industry, including $39 billion for federal grants to encourage chip companies to set up U.S. facilities.
The Commerce Department is expected to announce bigger prices in coming months for major chip manufacturing facilities owned by companies like Intel and Taiwan Semiconductor Manufacturing Company, better known as TSMC.
Microchip previously announced plans to increase its capacity in both Oregon and Colorado, but the government funding would be used to expand these improvements and bring more production back to the United States, officials said. According to the documents, Microchip relies on third-party facilities to make a significant portion of its products – about 63 percent of net sales in 2023 – a relatively common industry practice.
While attention has focused on ensuring that U.S. facilities can produce some of the most advanced chips in the world, there are growing concerns about Chinese investments in less advanced semiconductors, known as legacy chips, that power cars, computers, rockets and power dishwashers.
U.S. officials question whether such investments could increase the United States’ dependence on China or allow Chinese companies to undercut their competitors. The Ministry of Commerce said it plans to launch a study this month to determine how U.S. companies obtain their old chips and reduce security risks associated with China.
The deal announced Thursday is a non-binding preliminary agreement. The Department of Commerce will conduct due diligence on the project before finalizing the terms of the award.
The department says it has received more than 570 declarations of interest and more than 170 preliminary applications, full applications and concept plans from companies and organizations interested in the financing.
Don Clark contributed reporting from San Francisco.